Bidding Wars Wane as First-Time Buyers Stop Looking

The share of first-time buyers declined to 29% in August, and the number of offers on homes that sold in August decreased to an average of 4 offers per home, according to the August Realtors Confidence Index report.

The share of first-time buyers to the total existing-home sales market declined to 29% in August 2021 from 33% in the same month in 2020. During the first eight months of 2021, the first-time buyer share averaged just 31% compared to 33% in 2020 and 32% in 2019 (pre-pandemic).

A variety of factors are causing buyers to step away: lack of affordable homes, especially at price points below $250,000 (single-family homes priced at $250,000 and below made up 29% of single-family existing-home sales in 2021 compared to 38% in 2020), lack of financial resources to meet the down payment requirements ($52,000 for a 10% down payment and 5% closing cost on a $350,000 home), and competition with cash buyers (cash sales accounted for 22% of existing-home sales compared to 18% in the same period one year ago). Among buyers, 25% also waived the appraisal contract contingency, which indicates that these buyers are not obtaining mortgage financing. In a tight market, sellers tend to prefer cash because they also need cash to make a down payment and to sell quickly so they can close quickly

However, demand for vacation homes, particularly properties that offer buyers the ability to work from home, rose 6% since July 2020, compared with trending at 5.6% in 2020 and 5.2% in 2019. 

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