First-Time Home Buyer Affordability Report – Q3 2024

Affordability for first-time home buyers improved slightly in the third quarter, but things are far from easy out there.

The median age for first-time home buyers recently rose to 38, according to 2024 data from the National Association of Realtors — the highest age on record, and evidence of difficult market conditions. Small improvements in the third quarter were hardly enough to relieve the pressure on would-be buyers.

Average mortgage rates came down from 7% in Q2 to 6.5% in the third quarter, reducing interest costs. Inventory also improved in the most recent quarter — the number of active listings at any given time rose 16%. And list prices were relatively stable, falling 2% quarter over quarter. Despite these improvements, rates and prices are still considerably higher than just a few years ago, and inventory has plenty of room to grow.

The experience across metro areas varies widely. Buyers in some places have seen more dramatic improvements as previously hot markets have cooled. Over the past year, typical list prices in Miami have fallen 14%, while the number of available homes rose 71%. Likewise, list prices in San Diego — one of the nation’s highest-priced metros — fell 10%, while active listings climbed 78%.

More homes available, but still a dearth of listings

In the third quarter, the number of active listings rose 16% nationwide when compared with the previous quarter. Listings are up 35% when compared with the same period last year. But the supply of homes is still suffering — down 26% from the same time five years ago.

Many metro areas have seen improvements in inventory over the past year. Eight metros have seen inventory improve by over 60% since Q3 2023, with half of the top movers in Florida: Tampa, Fla. (+86%), San Diego (+78%), Orlando, Fla. (+74%), Miami (+71%), Seattle (+70%), Denver (+68%), Jacksonville, Fla. (+68%), Charlotte, N.C. (+61%).

First-time home buyer tip: Having more homes to choose from means you’re more likely to find one that fits your needs. But most local housing markets are still suffering from low inventory. A real estate agent with boots-on-the-ground experience in the neighborhoods you’re eyeing can give you the best information given your budget and needs. Be prepared to compromise. Ultimately, you may have to sacrifice your first choice neighborhood, number of bedrooms or other items on your wish list to make a home purchase.

List prices steady, but monthly house payments exorbitant

High rates and high prices tend to sideline potential buyers, which can initially boost the number of available homes. In some cases, this can ease price pressures. The typical list price fell slightly (-2%) in the third quarter compared to Q2, but the estimated first-time home buyer housing payment remains quite high.

First-time buyers purchasing a typically priced home with a 9% down payment (the median for these buyers in 2024, per NAR data) could expect to spend $3,240 per month. This monthly bill includes not only the loan principal and interest, but also homeowners insurance, taxes and private mortgage insurance.

In some metros, it’s unlikely buyers would be able to put just 9% down. In the most expensive markets, home prices exceed the limits that the Federal Housing Finance Authority sets for conventional loans. A buyer would need a jumbo mortgage, which can come with stricter standards, including a higher required down payment.

First-time home buyer tip: Your monthly housing payment depends on the home price and interest rate, but also how much you’re paying for homeowner’s insurance, real estate taxes, your down payment and private mortgage insurance (PMI), if your down payment is less than 20% of the purchase price. The larger your down payment, the smaller your monthly housing costs; it could even help you get a lower interest rate.

What can first-time buyers expect from here?

Mortgage rates are expected to decline slightly throughout 2025. Though rates aren’t expected to be truly low, they could end the year near 6%. As this happens, more homeowners may be willing to list their homes for sale. An increase in inventory won’t likely be enough to reduce prices, but could help prevent dramatic price increases. However, the downside to lower rates and more homes to choose from is greater competition, as more buyers come into the market.

In 2025, buyers will continue to face obstacles driven by demand outpacing supply. By focusing on the things they can control — like how much they have set aside for a down payment, their credit score and their willingness to be flexible — first-time buyers can improve the likelihood of becoming new homeowners.