30 Things First Time Homebuyers Need to Know in 2023

Roundabout in a neighbourhood of red and white houses with gardens.

Buying a home is one of the most significant financial decisions you will make in your lifetime, and it can be overwhelming, to say the least. With so much information out there, it’s easy to feel lost in the sea of real estate jargon and advice. That’s why we’ve put together a list of 30 things that every first-time homebuyer needs to know in 2023. From understanding the current real estate market trends to the home-buying process and home maintenance this guide will equip you with the knowledge you need to make informed decisions and navigate the home-buying process with confidence. 

So, kick off your shoes, and let’s dive barefoot into 30 things which will help you navigate the planning, research and purchase of your first home in 2023! 

Demographical Data of Home Buyers

Understanding the demographical data of buyers in the market can help you identify trends and make informed decisions, and plan accordingly. 

  1. According to the National Association of Realtors, the median age of first-time homebuyers in the US is 36 years old in 2022 (Source: National Association of Realtors, 2022).
  2. In 2022, 78% of first-time homebuyers finance their home purchase with a mortgage compared to 87% in 2021 (Source: National Association of Realtors, 2022).
  3. Millennials make up the largest group of first-time homebuyers, accounting for 37% of all purchases (Source: National Association of Realtors Generational trends report).
  4. Gen Xers are the second largest group of first-time homebuyers, accounting for 24% of all purchases (Source: National Association of Realtors Generational trends report).
  5. 61% of all homebuyers are married couples, while only 10% of the buyers include unmarried couples (Source: National Association of Realtors, 2022).
  6. Among unmarried homebuyers (9%), 21 % are younger millennials. (Source: Bankrate)
  7. Just over half (55%) of buyers under 29 rented before purchasing their home, and 51% of those aged 30-39 rented too (Source: National Association of Realtors Generational trends report).

Financing Data of First-Time Home Buyers

The housing market is constantly evolving. Whether you’re a first-time homebuyer or a seasoned investor, understanding the current trends and statistics is essential to make informed decisions. In this section, we’ll delve into some key data points that give insight into the state of the housing market in 2022.

  1. In 2022, the median credit score for first-time homebuyers was 768, indicating a strong credit history and making them attractive candidates for lenders (Source: Federal Reserve Bank of New York).
  2. The median household income for first-time homebuyers in the US is $100,000 (Source: National Association of Realtors Generational trends report).
  3. Inflation has made it difficult for prospective homeowners to purchase a home. Not having enough money saved to make a downpayment is one of the most cited obstacles to homebuying (Source: Nerdwallet).
  4. The median down payment for first-time homebuyers is 6%, however, we saw an increase in the rate of downpayment during 2020 where the average downpayment made was nearly double the usual amount. Currently, the market is again facing a decline due to inflation and high mortgage rates (Source: Redfin).
  5. High inflation has impacted the average interest rate on a 30-year fixed-rate mortgage. Currently, the mortgage rates are expected to go as high as 7.75% compared to the all-time low-interest rate was 3.11% in 2020 (Source: The Mortgage Reports).
  6. The most common type of mortgage for first-time homebuyers is a conventional loan (Source: National Association of Realtors and U.S. Census Bureau).
  7. In 2022, first-time buyers reported making financial sacrifices to put down the downpayment. 22% of first-time homebuyers receive down payment assistance from family or friends (Source: National Association of Realtors).
  8. Among first-time homebuyers, the most common financial sacrifice made was the cut-down cost on “luxury items”.
  9. The average home buyer with a credit score of ‘Excellent’ rather than ‘Good’ would save over $10,000 in interest fees across one typical 30-year mortgage (Source: Self).
  10. The average mortgage payment for new applicants in October 2022 was $2,012 per month (Source: Mortgage Bankers Association).
  11. In 2022, the homeownership rate in the US was around 65% (Source: U.S. Census Bureau).

white and brown concrete building under blue sky during daytime

Characteristics of the Homes Purchased

Buying a home is an overwhelming decision on its own, but when you add factors like neighbourhoods and mortgage payment plans into the mix, the decision is even more crucial. 

Most first-time homeowners have multiple factors to consider, from location and affordability to the condition of the property. However, one of the top considerations for many buyers is the mortgage, loan, or payment plan options that are available. Factors such as interest rates, down payments, and monthly payments can heavily influence a buyer’s decision. 

Understanding these factors can help you make an informed decision when it comes to purchasing a home. 

  1. According to a special study for Housing Economics in 2021, 60% of buyers showed a desire to purchase a newly-built home over an existing home (Source: National Association of Home Builders).
  2. The quality of the neighbourhood proves to be a deciding factor in most homebuyers’ decision to make the final offer. 49% of the buyers stated that location and convenience is a deciding factors after affordability (Source: National Association of Realtors, 2022).
  3. However, this desire did not translate into action, because 88% of buyers purchased a previously-owned home, while only 12% of buyers purchased a new home (Source: National Association of Realtors, 2022).
  4. According to data from the U.S. Census Bureau, the median home price in the United States was $347,500 in 2020. However, fast-forward to 2022 and inflation and rising prices have impacted the prices of newly constructed houses making them almost out of reach of an average buyer. The median U.S. new home price is now reaching almost $390,900 (Source: U.S. Census Bureau & Knock).
  5. 7% of the new homeowners were interested in purchasing an elderly-friendly home, while 25% of the purchases were interested in either a townhouse or a condo (Source: National Association of Realtors, 2022).

First Time Home-buyers Regrets and Desires

Buying your first home is an amazing feeling. Not to mention it is an important milestone in “adulting”, however, if rushed into buying prematurely, you can end up having regrets.

Some first-time homeowners may regret not doing enough research before making their purchase or not seeking out a professional home inspection. This can lead to unexpected problems or expenses that could have been avoided. First-time homeowners need to do their due diligence and seek guidance from professionals before making a significant investment in a home.

  1. According to the US Census Bureau, only 7% of homes constructed in 2019 were considered entry-level, which is a significant decline from 40% of new homes in 1980. This shortage of entry-level homes has become increasingly problematic for millennials (Source: U.S. Census Bureau).
  2. The majority of buyers who recently purchased new homes, about 41%, were trying to steer clear of renovations and issues with plumbing or electricity. On the other hand, buyers who purchased previously-owned homes were mostly concerned about getting a better price.
  3. The most common reason for purchasing a home is the desire to move closer to friends and family (21%), while others moved due to their desire to move to a better neighbourhood (Source: National Association of Realtors).
  4. 37% of all homebuyers said that finding the right property was the most difficult part of the home-buying process (Source: Zillow).
  5. According to a survey by Bankrate in 2021, 64% of millennials say that they have some regrets about purchasing their current home. This was due to the high maintenance and repairs cost (Source: Bankrate).
  6. It usually takes one month for a house to be sold. However, in 2022, most houses spend two weeks on the market, one extra week compared to 2021. In 2020, the average time a home spent on the market was 24 days (Source: National Association of Realtors, 2022 and Zillow).
  7. Regardless of all the shortcoming, home purchases is a good investment with 88% of first-time buyers regarding it as a good financial investment overall (Source: National Association of Realtors, 2022).

Forecasts for 2024 

The Housing experts at Zillow anticipate a 1.6% drop in home prices through December 2023, as affordability challenges continue to dampen demand for homes. However, the panel predicts that home price growth will pick up in 2024, with an average annual rate of 3.5% through 2027, similar to the stable period of 1987-1999.

Key Takeaways

  • Understanding the demographical and financial data of homebuyers can help you identify trends and make informed decisions.
  • Inflation has impacted the housing market, making it difficult for prospective homeowners to make a down payment and leading to higher interest rates.
  • The most common type of mortgage for first-time homebuyers is a conventional loan.
  • When buying a home, there are many factors to consider, including location, affordability, and payment plan options.
  • The home-buying process can be overwhelming, but having knowledge of the market and the process can help you navigate it with confidence.

In conclusion, buying a home is a complex and significant decision that requires careful consideration and planning. Understanding the current market trends, characteristics of homes purchased, and common regrets can help first-time homebuyers make informed decisions. The housing market is constantly evolving, and it is essential to stay up-to-date with the latest trends and statistics to make the best decisions. With the right mindset, resources, and guidance, homeownership can be a rewarding and beneficial investment.

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