Buying a house was obtainable only for the haves in 2023 as home prices and mortgage rates soared. Homebuyers’ median household income increased by $19,000 this year from 2022, reaching $107,000, according to the National Association of Realtors’ 2023 Profile of Homebuyers and Sellers.
The report is an annual survey of homebuyers and sellers who closed transactions between July 2022 and June 2023.
“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,” Jessica Lautz, NAR deputy chief economist and vice president of research, said in a statement.
“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.”
Buyers offer higher down payments to offset steep borrowing costs
Overall, the typical down payment was 8% for first-time buyers and 19% for repeat buyers — the highest share since 1997 and 2005, respectively. Meanwhile, in September, one-third of U.S. home purchases were all-cash transactions, compared to 29.5% a year ago, according to a Redfin report. It was the highest share of all-cash transactions recorded since 2014.
However, a significant majority of buyers (80%) financed their home purchase in 2023, up from 78% in 2022 but still down from 87% two years ago, according to the survey.
NAR also found that first-time homebuyers were more likely to tap into their financial assets to secure their down payment. In fact, 11% of first-time buyers relied on the sale of stock or bonds; 9% used their 401(k) or pension accounts; 2% used their individual retirement account (IRA) savings; and 2% sold cryptocurrency.
Despite affordability hurdles, first-time homebuyers “tiptoed back into the market with less competition and fewer multiple-offer scenarios,” Lautz said. The share of first-time buyers rose to 32%, up from last year’s low of 26%.
However, the share remained below the historic average of 38% since 1981. On average, buyers were slightly younger this year (35 years old) compared to last year (36 years old). Typical repeat buyers were 58, down from 59 in 2022.
According to the survey, 81% of buyers were White, down from 88% a year ago. Roughly 7% were Hispanic compared to 8% in 2022; 7% were Black, up from 3% in 2022; and 6% were Asian or Pacific Islander, a 2% increase over last year. Meanwhile, 6% identified as some other race, up from 3% year over 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,” Lautz said. “This shows encouraging signs that the homeownership rate may narrow in the future as more minority buyers enter the market.”
Sellers, homebuyers turned to real estate agents for help
The vast majority of buyers still used an real estate agent to purchase their home. In 2023, 89% of recent buyers hired an agent to purchase their home, up from 86% in 2022. Meanwhile, 89% of home sellers also worked with an agent to sell their property, up from 86% over the same time period.
“While the housing market had limited inventory and home prices were in flux, buyers and sellers both increased their use of real estate agents,” Lautz said. “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 and lived in their home for 10 years before selling.