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First-time Homebuyers: 32 Percent of Residential Market in February 2017

Sales to first-time homebuyers accounted for 32 percent of residential sales in February 2017 (33 percent in January 2017; 30 percent in February 2016), according to the February 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1]

Sustained job growth and improving incomes along with the aging of the Millennial generation are likely underpinning the continued, albeit modest, increase in homebuying by first-time buyers. The anticipation of further increases in interest rates may also have prompted first-time buyers to enter the market.[2] As shown below, the population most likely to be first-time home buyers—those aged 25 to 34—is projected to continue to increase through 2024 at which point many Millennials will have aged out of this age group.

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Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 29 percent of residential buyers in February 2017 (28 percent in January 2017; 28 percent in February 2016). The share of buyers 34 and under appears to be on a gradual uptrend from the 26 percent share in July 2013 when this information was first collected in the survey.[3]

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Homebuyers who were renting prior to their recent home purchase accounted for 42 percent of sales in February 2017 (42 percent in January 2017; 38 percent in February 2016). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in January 2014 when this information was first collected.[4] At the same time, the share of buyers who were living in their own home at the time of their recent home purchase has decreased.

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[1]The author thanks Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.

[2] Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac. The average 30-year mortgage rate was 3.54 percent in the week of November 3, 2016. It broke above four percent, to 4.03 percent, in the week of November 24, and it climbed to 4.32 percent in the week of January 29. Since that time, rates have eased somewhat. The average rate stood at 4.21 percent in the week of March 9, 2017.

[3] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 28 percent were 18-34 years old. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.

[4] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.

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