Despite the challenges of rising interest rates and limited inventory, first-time homebuyers are finding a way to make their dream of homeownership a reality. According to Zillow's 2023 Consumer Housing Trends Report, first-time buyers now make up 50% of all homebuyers, up from 45% last year and a meaningful jump from 37% in 2021. The share of first-time buyers likely hasn't been this high since around 2010, when many were motivated by the first-time homebuyer tax credit.

The gains first-time buyers are making are relative to repeat buyers, of course, many of whom have locked in mortgages at a rate below 5%, making them almost half as likely to consider moving. First-time buyers make up a larger piece of a smaller pie, as home sales and inventory shrink, however, this significant rise in the share of first-time buyers helps explain what's driving demand and keeping upward pressure on prices.

According to the report, affordability is the greatest hurdle for today's first-time home buyers, with it now taking nearly 12 years for a typical first-time buyer to save up for a down payment, compared to nine years prior to the pandemic. Meanwhile, the typical monthly home payment has more than doubled in that time. Yet the growing share of first-time buyers suggests many are getting creative to make homeownership a reality. 

Zillow's report finds that most first-time buyers are tapping at least two sources to finance their down payment (60%), most commonly their savings and gifts from family or friends. A growing share of buyers are also paying an upfront fee to reduce the interest rate on their mortgage and in turn, lower their monthly payment. Research from Zillow Home Loans finds nearly 45% of conventional primary home borrowers bought points to ease monthly costs, compared to 30% who did the same in 2021.

Nearly half of first-time home buyers are millennials (49%), a massive generation of adults ages 29–43 who are fueling fundamental housing demand as they hit their prime home-buying years. Gen Z adults between 18 and 28 years old are hot on their heels, making up more than one-quarter of all first-time buyers (27%).

These younger buyers are debunking the "lazy millennial" myth by working harder during the home-buying process. Zillow's report finds that first-time buyers are more likely to contact at least three real estate agents and three mortgage lenders, compared to repeat buyers. They're also more likely to make at least two offers on homes, and are more likely to report being denied a mortgage at least once before they're approved for a loan.

First-time buyers are seeing their persistence pay off for a piece of the American Dream, and many still believe the opportunity to build equity outweighs today's higher costs of entry.