Bidding wars and high home prices are increasingly sidelining first-time home buyers. To make matters more challenging, they are also up against investors willing to pay cash for a home, which they are typically unable to do. They are losing out on homes facing multiple offers and missing some of the lowest mortgage rates of all time—under 3%.
But “the American dream [of homeownership] is not dead,” Jessica Lautz, vice president of research at the National Association of REALTORS®, told realtor.com®. “It’s hard for first-time home buyers in the market right now to compete.”
The median home list price rose 13% annually in June, reaching a record high of $385,000, according to realtor.com®’s data. Rental prices reached a median of $1,575 in June. Young adults are facing high rents that are making it more difficult to save for a down payment.
Meanwhile, the percentage of first-time home buyers fell to 31% in May and June, which is the lowest level in more than three decades, according to NAR research.
“For this housing cycle, many first-time buyers probably missed the boat,” Ali Wolf, chief economist of building consultancy Zonda, told realtor.com®. But “housing is a cyclical business. So while it feels like prices will only go up forever, the market will change. It always does.”
Once more homes are listed, first-time buyers may face less competition. Some hope that is starting to occur: The number of new listings on realtor.com® rose 9% in the week ending July 24 compared to the previous year.
“We may see first-time buyers have better footing,” Lautz said.
Some first-time home buyers may be better situated to purchase a lower-priced condo rather than a single-family home, Wolf said. Some would-be buyers also may want to consider either purchasing a fixer-upper or expanding their target area to try to expand their choices.
“To the first-time buyers who feel like they’re never going to be able to own a home, be patient,” says Wolf. “Keep saving, keep a passive eye on the market, and watch listings. Be in a place where you’re ready to act fast if [the market hits] a soft patch.”