Older, white homebuyers push others out of market
American homebuyers are older, whiter and wealthier than at any time in recent memory, with first-time buyers accounting for the smallest share of the market in 41 years, the National Association of Realtors found in its annual profile of homebuyers and sellers.
White buyers accounted for 88% of home sales during the survey period, up from 82% during the same period a year earlier, reaching the highest level in 25 years, according to the association’s findings.
The new findings add weight to a hard truth that many young families have experienced as they struggle to save money to buy a home, competing in the most brutally competitive housing market in modern history: They have been elbowed out by buyers who have something they might never have — all cash.
The imbalance has made it nearly impossible for younger people with moderate and even middle incomes to own a home. The repercussions could be lasting, and deepen racial and generational disparities in homeownership. Without access to an investment that is usually a family’s biggest asset and a critical way to build generational wealth, a household may be shut out of one of the country’s best opportunities for upward mobility.
Homeownership offers another path to wealth, even if a home’s value remains flat: It provides the stability of a set, monthly mortgage payment that, as a person approaches retirement age, is often paid off in full.
While cash buyers have been insulated from the Federal Reserve’s moves to tamp down inflation by raising the federal funds rates, which indirectly impact home mortgages, first-time buyers are watching as what little buying power they had evaporates.
“This is a feedback mechanism that can potentially supercharge wealth inequality in our economy,” said Austin Clemens, the director of economic measurement policy at the Washington Center for Equitable Growth, who studies housing inequities. “It’s hitting younger people, it’s hitting lower income people. And we also find that this is hitting Hispanic and Black households especially hard.”
Historically, first-time buyers made up about 40% of the market. But the share of first-time buyers fell to 26% during the 12-month survey period, from July 2021 through June 2022, plummeting to the lowest level since the trade association began tracking such data in 1981.
The median age for firsttime buyers was, at 36, the oldest it has ever been since 1981, as was the median age for repeat buyers, which rose to 59, during the survey period.
Together, Black and Asian/ Pacific Islander buyers accounted for just 5% of all home sales, as their shares in the market dwindled in the survey year compared with the previous year. Latino and Hispanic buyers accounted for 8% during that period, according to the nationwide survey of 4,900 recent buyers of primary residences.
The shift comes as a historic shortage of available homes contributed to a stratospheric rise in home prices, leading to bidding wars, further driving up prices. The two-year run cooled as mortgage rates started climbing, rising above 7% by October, doubling in nine months. For many firsttime buyers, soaring interest rates delivered a final blow, closing the door on ownership for the foreseeable future, as home sales stall amid the rising rates.
“It’s staggering what someone can lose out on when it comes to housing wealth,” said Jessica Lautz, the vice president of demographics and behavioral insights at the National Association of Realtors, adding that a typical homeowner has gained about $210,000 in equity over the past decade.
About 27% of repeat buyers paid all cash for their homes during the period of the survey, up from 17% a year earlier. By contrast, only 3% of first-time buyers paid in cash during the survey year.
Added to that, whatever savings first-time buyers brought to the table for a down payment and closing costs was dwarfed by a rapid rise in home values, which jumped by double-digit percentage increases for two years. Unlike repeat homebuyers, many first-time buyers spent the past two years at the mercy of an unforgiving rental market, where rents jumped by almost 18% over the course of 2021, according to Apartment List, further cutting into their ability to save.
Older buyers are now dominating the housing market. People ages of 55 to 74 accounted for 42% of homebuyers, while the share of people ages of 25 to 34 accounted for only 14% of buyers during the survey year, a 10% drop from the same time period a year earlier. The rise in the age of first-time buyers ends decades of stability when they averaged around 30 to 32, according to the survey.
Last fall, Amy and Bryan Benson were finally in a position to buy, cobbling together about $25,000 — a combination of their savings and financial assistance from a first-time buyer program — for a down payment.
They blanketed their suburban Maryland neighborhood with flyers asking if anyone would sell them a house.
At first, the plan seemed to work. A seller contacted them about a three-bedroom town house, which they agreed to buy for $635,000, the outer limits of their budget. They hoped they would finally get out of the cramped rental where they live with their two young children and into a house twice its size in Gaithersburg, a city about 25 miles from Washington, D.C.
But by the time the seller was ready to move forward with the deal in March 2022, interest rates had spiked and estimated $3,300 monthly mortgage payments ballooned to more than $4,000. The deal fell apart.
“It was just gut-wrenching,” said Bryan Benson, 38, who works for a tech company. “It still hurts, especially knowing it doesn’t have to be this way, in the sense that it used to be so much easier for people to afford to buy a home. It feels like our generation is really struggling to make that leap.”