First-time homebuyers in Twin Cities are older, have fewer options
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It's getting harder to buy your first home in the Twin Cities.
By the numbers: The share of homes sold to first-time buyers in the U.S. has shrunk to a record low — dropping from 34% to 26% from 2021 to 2022 — as inventory and affordability issues persist, according to the National Association of Realtors.
- First-timers are also waiting longer to buy; the median first-time buyer age jumped from 33 to 36 during that time, the latest data shows.
What's happening: The Twin Cities' cash-rich market is squeezing out many first-time buyers who don't have access to that kind of money, managing broker Jamar Hardy with Edina Realty tells Axios.
- "Even if they do everything asked of them to be ready, there's less and less affordable opportunities for them to get in," says Hardy, president-elect of Minneapolis Area Realtors.
Between the lines: In April, close to 29% of Twin Cities home sales were made in cash, as the portion of U.S. cash buyers reached a nine-year high, new Redfin data shows.
State of play: Getting access to creative financing options or supportive funds — Minnesota Housing offers a variety of loan programs — is the best opportunity for a first-time buyer to win in this market, Hardy says.
- He sees first-timers who don't have a lot of cash lean into 3% or 3.5% down payment mortgage products.
What they're saying: Saving enough for a down payment is the biggest barrier to entry, says Brandi Snowden, a director at the National Association of Realtors.
- Many would-be-buyers are saddled with debt, including student loans, car loans and credit card debt.
Be smart: You don't need to put 20% down to win. Homebuyers aren't putting as much money down as they were at the height of the housing frenzy, Axios' Emily Peck reports.
- The median down payment in the metro area was 10% in April, per Redfin.
- "If you can come in at 5% or 10% down, it's competitive enough," Hardy says.
The big picture: Funds aside, preparation is the biggest advantage. Many people are working with lenders to guarantee the transaction will close without hiccups, Hardy says.
- "That's making sellers feel comfortable to say, 'OK, I'll work with this first-time home buyer offer, even if they're bringing in a little bit less down payment and asking for an inspection.'"
The bottom line: Even as housing costs rise in the Twin Cities, this is still a more affordable big metro than most.
- It'll take Minnesotans 7.4 years on average to save for a 10% down payment on the typical home, Zillow data shows.
- Nationwide, the average is 8.9 years.