Interest rate relief, down payment assistance and builder incentives are helping first-time homebuyers compete, according to an update from the National Association of Realtors.
The National Association of Realtors expects the affordability situation to improve throughout the year as inventory levels steadily rise, giving homebuyers more room to “make the math work.” The trade group said in a new report that first-time buyers in particular are already realizing their dreams of home ownership in a “unique way”.
“[First-time homebuyers] “There is strong demand for the American dream of homeownership, and they just feel really left behind right now. Homeownership is a way for many Americans to build wealth…and unfortunately, they are forced to the sidelines for longer periods of time, only to lose the wealth they have earned,” NAR Deputy Chief Economist Jessica Lautz said in a Tuesday report.
“[But] They are also looking at unique ways to start homeownership,” she added.
Lautz said homebuyers are paying an average of 10% down, which is the highest down payment level in 40 years. Saving a 10% down payment isn’t an easy task, but it often pays off in the long run, lowering your total loan and monthly costs. Most down payments come from personal savings, but also include funds from 401(k)s, IRAs, stocks, and financial gifts from family and friends, according to the report.
In addition to higher down payments, homebuyers are showing interest in adjustable-rate mortgages with lower initial interest rates, which is key to making monthly mortgage costs more affordable at the start of the loan, according to the report.
But Shelley Joniets, loan manager at Chase, told NAR that ARMs aren’t necessarily a long-term strategy and should be thought of only as a way for homebuyers to get their foot in the door.
“Our role is to make sure they fully understand how this loan works, what future interest rate adjustments will be, and whether the structure fits into their long-term plans,” she said. “ARMs make sense for many first-time homebuyers, especially those who only expect to live in their home for a short period of time. They can provide buyers with the affordability boost they need to get into the housing market faster.”
The report also highlighted down payment assistance programs and home builder incentives as important tools available to homebuyers while shopping.
The terms of down payment assistance programs vary, but those offered by major banks, such as Bank of America, typically offer a 3% subsidy (up to $10,000). Homebuyers can also apply for a separate homeownership subsidy, with a total subsidy amounting to $17,500.
Matt Vernon, head of consumer lending at Bank of America, told the association: “It’s critical that you understand the process, research whether your local government may qualify for grants or down payment assistance, and consult with a lending professional.”
Down payment assistance is supported alongside home builder incentives and price reductions averaging around 5% through the end of the year, ensuring a competitive playing field for homebuyers ready to start their homebuying journey.
“This is kind of a way to draw young households in particular into the American dream of homeownership,” Robert Dietz, chief economist at the National Association of Home Builders, told NAR. “Builders expect the share of townhomes to continue to rise.”
Lautz said other market factors, such as interest rate easing, will create a positive outlook for homebuyers in 2026.
“Interest rates have fallen recently and there is more inventory coming into the market, meaning even if affordability conditions have improved slightly, there is an opportunity for first-time homebuyers,” she said. “And I hope they can take advantage of that next year.”
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