What’s Holding First-Time Homebuyers Back?

Mary Kay Scully is Director of Customer Education at Enact, leading the development of the company’s customer education curriculum. The statements in this article are solely the opinions of Mary Kay Scully and do not necessarily reflect the views of Enact or its management.

With peak homebuying season in full swing, homebuying should be picking up. However, lately, some first-time homebuyers have been opting to sit out.

What exactly are they waiting for? For many first-time homebuyers, making a purchase right now seems unattainable. Most are hoping for better rates, lower prices and more inventory to choose from. Add in other economic pressures outside the housing market, like tariffs and recession concerns, and it’s easy to see why these buyers are hesitant to jump in the market.

What is a lender to do? While these concerns are valid for many first-time homebuyers, this mindset can cloud their judgment. While everything seems to be going wrong, there may actually be some factors going right for buyers right now. As their lender, how can you help first-time homebuyers break through their homebuying fears and get in the game?

Changing Demographics

To better understand first-time homebuyers, it’s important to look at the data. Their demographics are changing. First-time homebuyers aren’t the 20-something couples looking for their white picket fence anymore. The 2024 NAR Profile of Homebuyers and Sellers noted that 2024 was the smallest group of buyers since the beginning of the report. Only 24% were first-time homebuyers, and their average age increased to 38 years old. Additionally, downpayments were at their largest since 1997, at 9%.

Why Aren’t They Buying?

Why did we have so few first-time homebuyers in 2024? Is it affordability, are people waiting to be more prepared, or is it something else entirely? There’s no one correct answer. People have been waiting to buy homes for many reasons over the last few years, starting with the economy. The election and new administration, potential Fed rate cuts and hoping for new affordable housing initiatives were just a few of the economic factors keeping potential buyers on the sidelines.

Many potential buyers were also working on building savings. With higher home prices come higher downpayments, and 62% of Americans believe that a 20% downpayment is required to purchase a home, according to NerdWallet’s 2025 Home Buyer Report. For the average American purchasing a median-priced home, it would take approximately 24 years to save enough for a 20% downpayment plus closing costs at the current national savings rate.

In addition to educating buyers on low-downpayment options, you also need to help them understand that the amount of money they put down likely has less of an impact than they believe. Simply walking buyers through different downpayment scenarios is essential to helping them understand how much they need to buy a home at a sustainable price.

Additionally, many first-time buyers are unaware of the numerous resources that exist to help with purchasing a home. It’s important to walk potential buyers through options such as mortgage insurance or down payment assistance programs, as these programs may allow them to make a purchase sooner.

Of course, other potential first-time homebuyers may be focusing on paying down other debt to prepare for buying a home. It’s easy to blame student debt as the primary villain holding young buyers back, but the NAR study noted that only 32% of FTHBs had student debt. According to reports from CNN, however, another debt issue is emerging. Credit cards and car loans are on the rise with this group, and many would-be homebuyers are falling behind on payments. These buyers may not yet be ready for buying a home, but they also may be under misconceptions about how much of their debt they need to pay down in preparation. Walking borrowers through loan scenarios and explaining the impact of debt-to-income ratios can educate borrowers on where to focus their energies while preparing to buy.

What They Missed Out On

It’s easy for these buyers to think the only thing they are missing out on is a place to live, but homeownership is much more than that. These buyers are possibly missing out on thousands of dollars in equity and building wealth that can impact future generations in their family. Purchasing a home is far more than just a roof over their heads – it can be an incredibly valuable investment in their future. For example, the St. Louis Fed’s data shows the median sale price in Q4 2018 was $322,800. In Q4 2024, it was $419,200. Accordingly, that seven-year delay potentially cost buyers $96,400 in appreciation alone. And that doesn’t factor in the impact of today’s higher interest rates.

This is not to say that every buyer should rush into a deal just so they can start building equity. It is important, however, that buyers consider not only the risks holding them back but also the potential rewards in equity they could be building.

Though homebuying conditions seem unfavorable, many first-time homebuyers may be missing out by waiting. By understanding what’s holding them back, lenders can help educate these buyers, calm their fears and get them back on the path to homeownership.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)