First-time Homebuyers Account for 43% of New Home Market

Washington, DC, April 8, 2021-First-time homebuyers account for almost half (43%) of the new home market in 2021, up from 32% in 2018, according to recent data from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

According to the index, about two-thirds of the builders reported that more than 20% of their homes were sold to first-time buyers. Twenty-seven percent of builders said more than half of their sales were to first-timers.

“A growing number of first-time buyers are eager to purchase a new home, yet home prices remain a challenge,” said NAHB chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Policymakers must address the barriers to entry for buyers, such as soaring material costs added to the price of a new home, to keep the American Dream of homeownership within reach of everyone.”

Homebuilders recognize the variety of factors that contribute to housing affordability. This year, building materials have played a significant role. Lumber prices have skyrocketed more than 180% since last spring, and this price spike has caused the price of an average new single-family home to increase by more than $24,000 since April 2020, according to NAHB standard estimates of lumber used to build the average home.

The average first-time buyer share has trended upward steadily since NAHB began using the current methodology to measure it in 2016. Between 2018 and 2021, the share grew strongly from 32% to 43%. The reason for the upward trend before 2018 is less clear, but declining interest rates undoubtedly contributed to the post-2018 surge. The rate on three-year fixed rate mortgages in the Freddie Mac Lender Survey declined from over 4.75% in October 2018, to under 2.75% by the end of 2020.