The dream of homeownership remained elusive for many first-time buyers in the first quarter of 2024, despite traditionally lower home prices during this time of year. The combination of high home prices, low inventory, and rising mortgage rates created a challenging market for prospective buyers, especially those looking to purchase their first home.
In recent years, the real estate market has seen significant price growth, driven by a lack of available homes for sale. This trend, coupled with high mortgage rates, has made it difficult for first-time buyers to enter the market. First-time buyers typically have lower down payments, incomes, and credit scores compared to repeat buyers, making it harder for them to qualify for favorable loan terms.
According to the National Association of Realtors, first-time buyers accounted for just 26% of all home buyers in 2023, down from 34% the previous year and the lowest on record. The first quarter of 2024 saw stagnant home prices, with inventory remaining low and mortgage rates remaining high, further exacerbating the affordability challenges for first-time buyers.
Despite the traditionally lower home prices in the first quarter, homes across the country were still listed at prices that were five times the average income of potential first-time buyers. Some metro areas, such as Pittsburgh and Detroit, were more affordable for first-time buyers, with homes listed at around three times their annual income. However, cities like Los Angeles and San Diego had home prices listed at 9-12 times the income of first-time buyers.
While home prices remained relatively unchanged from the previous quarter, they saw a slight decrease compared to the first quarter of the previous year. In some metro areas like Miami and Oklahoma City, prices fell by 10% year over year after adjusting for inflation, while cities like Richmond and Los Angeles saw double-digit price increases.
The rise in mortgage rates has also played a significant role in affordability, with rates on 30-year fixed mortgages increasing from below 3% in 2020 to around 7% in 2024. This increase translates to higher monthly payments and additional interest costs over the life of a loan, making it harder for first-time buyers to afford a home.
As the definition of affordability shifts due to rising home prices and stagnant incomes, it is important for first-time buyers to carefully consider their financial situation before entering the market. Using tools like home affordability calculators can help buyers determine what they can realistically afford and make informed decisions about their home purchase.
Overall, the first quarter of 2024 presented significant challenges for prospective first-time home buyers, with high home prices, low inventory, and rising mortgage rates making homeownership a distant goal for many. Despite these obstacles, buyers can take steps to improve their financial situation and increase their chances of successfully purchasing their first home in a competitive market.