rewrite this title First-Time Home Buyer Affordability Report – Q4 2024 – NerdWallet

Buying a home in the fourth quarter of 2024 would have been like finding dirt-cheap eggs — difficult. Though home prices decreased slightly and the number of homes crept up, the market remained particularly challenging for first-time home buyers.

The last quarter of 2024 was as typical as could be expected in the current housing market. Which is to say, it was a little weird. As the weather cools, prices tend to fall slightly, and this held true last year. Bucking typical fourth quarter trends, though, the number of homes listed for sale rose slightly, as did sales volume.

However, despite modestly higher inventory and lower prices at year end, the number of existing homes sold in 2024 would wind up being the lowest since 1995, according to the National Association of Realtors.

Tough homebuying conditions are particularly hard on first-time buyers. A thinner credit history may contribute to the challenges, but creditworthiness isn’t the only impediment.

Affordability factors (cost of living, insufficient down payment and low income, for example) are among the top obstacles holding nonhomeowners back from buying, according to NerdWallet’s 2025 Home Buyer Report. Plus, 26% of nonhomeowners and 23% of homeowners agree: Mortgage interest rates are too high. Compounding the problem, a shortfall of listings is likely to continue as long as rates hold current owners in place.

Generally, as the weather cools, the number of listings decreases. But the past several years have taught us that seasonal fluctuations can be atypical when other complex factors — such as a pandemic, housing shortage and dramatic changes in mortgage rates — are present.

In the last quarter of 2024, the number of listings nationwide actually rose slightly (+2%). This marks a 26% increase from one year earlier, though the number of homes for sale is still 18% shy of where it was in the fourth quarter of 2019.

A handful of the most populous metros experienced notable increases in inventory for the fourth quarter. Miami and Baltimore saw the number of active listings rise 11% when compared to the previous quarter. Las Vegas listings rose 14%, and Phoenix saw 16% more listings in the last quarter of the year.

Over the past year, inventory has risen mostly in warmer climates. In San Diego, listings rose 53% year over year; Miami and Denver (+51%), Orlando, Florida (+49%), Las Vegas (+46%), Jacksonville, Florida (+44%), and Atlanta (+43%) have also experienced notable jumps in inventory.

Home buyer tip: Go into the homebuying process with a clear budget and potential compromises in mind. Competition may be cooler in cooler months, but the shortage of available homes is so widespread that you might still encounter bidding wars. With any potential home purchase, consider just how competitive you want to be before you make an offer. Know what you’re willing to compromise on, and set a firm “walk away” number. It can be easy to get caught up in winning the battle for a home with multiple offers, but be cautious not to let this push you outside your comfort zone. When the dust settles and you’re handed the keys, you want to make sure the prize is worth the cost you’ve agreed to pay.

Home list prices fell slightly (-4%) in the fourth quarter, after adjusting for inflation. But benefits from this slight decline were buffered by the rise in mortgage rates. Though the third quarter saw slight declines in average rates on 30-year fixed mortgages, the fourth saw them climb again.

There is good news, however. List prices didn’t rise in any of the 50 most populous metros examined, after accounting for inflation. That means buyer dollars went just as far if not further in the fourth quarter.

Three metros — Buffalo, New York, Milwaukee and Cincinnati — each saw list prices fall 8%, on average. And two very high-priced markets saw average list prices fall below $1 million: San Francisco, where they hit $952,000, and San Diego, where they decreased to $971,000 in the fourth quarter.

Home buyer tip: When setting a budget for a home, there are numerous considerations to account for, not the least of which are the home price and your income. Typically, your monthly housing payment will include a portion of the principal (the money you’ve borrowed), interest charges, homeowners insurance, real estate taxes and something known as private mortgage insurance (PMI), if you’ve put less than 20% down. In addition, your other monthly obligations like debt payments and ongoing expenses must be accounted for.

A home affordability calculator can help you sort it out and determine just how much house you can afford. According to one rule of thumb, which suggests housing costs absorb no more than 28% of your monthly pre-tax income, an average priced home in the fourth quarter would require an annual income of $135,000 — and that’s before factoring in debts and other obligations.

Home prices generally rise when weather warms and demand heats up, but they’re unlikely to run away in 2025. Price growth has slowed over the past few years, after rising at a breakneck pace from mid-2020 to mid-2022. So while prices will likely drift up as we enter homebuying season, buyers who have already been eyeing real estate listings shouldn’t expect much additional sticker shock.

The number of homes available for sale is likely to continue climbing. How fast that figure ascends is somewhat dependent on mortgage rates — lower rates would entice more existing owners to sell. But inventory also depends on new construction. First-time buyers may think buying a brand new home is out of the question, but some may be more affordable than existing homes in your area. Further, new construction may come with incentives or even an interest rate buydown to make the purchase more affordable. A local real estate agent can help you weigh the pros and cons of both, with localized knowledge.

Monthly median list price and list count figures are from monthly inventory data from the Realtor.com residential listings database as of Feb. 1, 2025. All nominal list prices were adjusted to Dec. 2024 dollars using the U.S. Bureau of Labor Statistics’ consumer price index. All monthly median figures were compiled into quarterly averages.

The median age of first-time home buyers is 38, according to the National Association of Realtors’ 2024 Profile of Home Buyers and Sellers. Estimated income for first-time home buyers was derived from the U.S. Census Bureau’s 2023 American Community Survey metro-level median household income for householders ages 25-44 — the range likely to include most first-time home buyers — and adjusted to Dec. 2024 dollars using the Bureau of Labor Statistics’ Employment Cost Index.

Homeowners insurance premiums were estimated using a sample policy profile across all markets through Quadrant Information Services.

Population estimates were updated to 2023 American Community Survey figures in this fourth quarter analysis, changing the make-up of the 50 most populous metros analyzed.

Additional sources for this analysis include: median real estate taxes from the American Community Survey, U.S. Census Bureau and the average Q3 rates on 30-year fixed mortgages, Freddie Mac Primary Mortgage Market Survey.