Half of all homebuyers are purchasing their first home, the highest share Zillow has ever recorded.
Zillow’s 2023 Consumer Housing Trends Report finds first-time buyers now make up 50 percent of all homebuyers, up from 45 percent last year and from 37 percent in 2021. The share of first-time buyers likely hasn’t been this high since around 2010, when there was a first-time homebuyer tax credit.
First-time buyers are making gains relative to repeat buyers. Zillow research finds a vast majority of homeowners with mortgages have locked in a rate below 5 percent and are almost half as likely to consider moving.
The significant rise in the share of first-time buyers helps explain what’s driving demand and keeping upward pressure on prices in a market with mortgage rates surpassing 7 percent.
“High mortgage rates and a shortage of inventory is keeping would-be repeat buyers in their current homes,” Zillow senior population scientist Manny Garcia said in a release. “A greater relative share of first-time buyers is filling the gap, and they’re competing against each other for the limited number of affordable starter homes on the market.”
Affordability is the greatest hurdle for first-time homebuyers, Zillow added. It now takes nearly 12 years for a typical first-time buyer to save up for a down payment, compared to nine years prior to the pandemic. Meanwhile, the typical monthly home payment has more than doubled in that time. Yet the growing share of first-time buyers suggests many are getting creative to make homeownership a reality.
Zillow’s report finds that most first-time buyers are tapping at least two sources to finance their down payment (60 percent), most commonly their savings and gifts from family or friends.
Nearly half of first-time home buyers are millennials (49 percent), a massive generation of adults ages 29–43 who are fueling fundamental housing demand as they hit their prime homebuying years. Gen Z adults between 18 and 28 years old are hot on their heels, making up more than one-quarter of all first-time buyers (27 percent).
Zillow’s report finds that first-time buyers are more likely to contact at least three real estate agents and three mortgage lenders, compared to repeat buyers. They’re also more likely to make at least two offers on homes and are more likely to report being denied a mortgage at least once before they’re approved for a loan. First-time buyers are seeing their persistence pay off for a piece of the American Dream, and many still believe the opportunity to build equity outweighs today’s higher costs of entry.