Typical Homebuyers' Income Rose by $19,000, Reports NAR
Washington, DC, November 13, 2023-The median household income for home buyers jumped to $107,000 from $88,000 last year, underscoring the increasing income required to purchase a home, according to the National Association of Realtors' (NAR) 2023 Profile of Home Buyers and Sellers. This annual survey of recent home buyers and sellers-this year tracking transactions between July 2022 and June 2023-has been NAR's flagship report since being first published in 1981, providing industry professionals insight into detailed home buying and selling behavior.
"Given the erosion of housing affordability due to higher home prices and mortgage rates, the household income for those who successfully purchased homes jumped by nearly $20,000 and topped six figures for only the second time in our records," said Jessica Lautz, NAR deputy chief economist and vice president of research. "In a still-competitive housing market, more well-off home buyers were able to have their bids accepted by offering larger down payments and even by paying cash."
First-time buyers made up 32% of all home buyers, up from last year's historic low of 26%. While this is an increase, it is well below the 38% annual average since 1981. The typical ages for first-time (35 years) and repeat (58 years) buyers declined slightly from the record highs of 36 years and 59 years, respectively, last year.
"First-time buyers tiptoed back into the market this year with less competition and fewer multiple-offer scenarios," explained Lautz. "While the share of first-time buyers is still near historic lows, it is higher than last year. Notably, today's first-time buyers had household incomes nearly $25,000 above last year and are more likely to use financial assets to enter the market."
Household composition also continues to shift. Seventy percent of recent buyers did not have a child under the age of 18 in their home, the highest share recorded. By comparison, in 1985, 42% of households did not have a child under the age of 18. Fifty-nine percent of recent buyers were married couples – the lowest share since 2010 – while single female (19%) and single male (10%) buyers increased. Nine percent of buyers were unmarried couples. Fourteen percent of home buyers purchased a multi-generational home, with the most common reasons being to take care of aging parents, to save money and to accommodate children or relatives over the age of 18 moving back home.
In terms of the shares of home buyers by race, 81% of buyers were White/Caucasian – down from 88% last year, 7% were Hispanic/Latino, 7% were Black/African American, 6% were Asian/Pacific Islander and 6% identified as some other race. Ten percent of buyers were born outside the U.S., up from 8% last year. Six percent of buyers spoke a primary language other than English, up from 5% last year.
"Home buyers in the past year were more diverse, both racially and ethnically, with increases noted among minority buyers, buyers who were born outside of the U.S. and buyers whose primary language is not English," said Lautz. "This shows encouraging signs that the homeownership rate may narrow in the future as more minority buyers enter the market."
The median distance between the home that recent buyers purchased and the home from which they moved was 20 miles. This is a decline from 50 miles last year and closer to the previous norm of 15 miles. Similarly, while suburbs have boomeranged back (47% in the 2023 report from 39% in the 2022 report), they remain under the norm seen in 2017 to 2021 when the share was more than half of buyers. At the same time, small towns and rural areas remain more popular than they were over the same period.
Eighty percent of buyers financed their home purchase, up slightly from 78% last year but still down from 87% two years ago. The typical down payment for first-time buyers was 8%, which is the highest since 1997 when it was 9%. The typical down payment for repeat buyers was 19%, the highest since 2005 when it was 21%. In securing their down payments, first-time buyers increased their reliance on financial assets this year, using the sale of stock or bonds (11%), 401k or pension (9%), IRA (2%) and the sale of cryptocurrency (2%).
Eighty-nine percent of recent buyers purchased their home through a real estate agent or broker, an increase from 86% last year. Ninety percent of buyers would use their agent again or recommend their agent to others. Eighty-nine percent of home sellers worked with a real estate agent to sell their home, an increase from 86% the year prior.
"While the housing market had limited inventory and home prices were in flux, buyers and sellers both increased their use of real estate agents," said Lautz. "Buyers wanted an expert to help them find the right home and conduct negotiations. Sellers also relied on real estate agents and brokers to price their home competitively and market it to potential buyers."
The typical home seller was 60 years old, unchanged from last year's report. Sellers typically lived in their homes for ten years before selling.