First-time homebuyers in California have faced a challenging housing market from 2018 through 2023. During this period, home prices reached record highs while the number of first-time buyers fell to record lows. In 2022, only about 26% of home purchasers were first-time buyers, the lowest share since records began. By comparison, during the post-2008 housing crash recovery, first-time buyers made up about 50% of buyers in 2010, boosted by federal tax credits.
The typical age of a first-time buyer also hit an all-time high – mid-30s in 2022, up from around 33 years just a year prior. This aging trend suggests that many young Californians are waiting longer to purchase their first home, often spending years renting or living with family before they can buy.
California’s home prices have soared, and the state consistently has one of the lowest homeownership rates in the nation (around 55%). High costs have particularly kept many younger households from buying their first home. In fact, only 34% of potential first-time buyers could afford an entry-level home in 2023.
Despite these challenges, there were signs of improvement by 2023. The share of first-time buyers rebounded modestly to about 32% of home purchases in 2023 – higher than the 2022 low point, though still below the historical average of ~38%.
Who Are California’s First-Time Homebuyers?
Age and Life Stage
The typical first-time homebuyer in recent years is in their mid-30s, considerably older than first-timers of past generations. In 2018, it was not uncommon for first-time buyers to be around 30–32 years old. But by 2022, the median age reached 36 – the highest ever recorded.
Buying a house in California now often requires more years of saving and career growth, so people are becoming homeowners later in life. Many have delayed homeownership due to extended schooling, student debt, or the high cost of living. For context, in 2010 the typical first-timer was only about 30 years old, meaning the median age has jumped by a half-dozen years over the past decade.
This aging trend suggests today’s first-time buyers may be more likely to have established careers and even families by the time they purchase a home. Indeed, a record-high 73% of recent homebuyers had no children under 18 at home – partly because many first-timers are waiting until they are older and more financially secure before having children or buying homes.
Household Income
First-time buyers today also have higher incomes than those in years past – because they need to. National data (which reflects California’s trend) shows that the median household income of first-time buyers in 2022 was about $95,900, a jump of nearly $25,000 from roughly $71,000 one year earlier.
This huge increase indicates that only higher-earning households were able to buy homes as prices and interest rates climbed. By comparison, repeat homebuyers (who often have existing home equity) had a median income of $111,700 in 2022.
In California’s pricey markets, the income needed to buy is even greater – often well into six figures. For example, one analysis found that a household would need around $190,000 annual income to afford a median-priced home in California’s coastal metro areas.
Marital Status and Family
A majority of first-time homebuyers are married couples, but there are also many single buyers. Nationally about 62% of recent buyers were married couples and ~20% were single females (with single males and unmarried partners making up the rest).
First-timers in California reflect this pattern – many are young couples combining incomes to afford a home. Notably, single women purchase homes at twice the rate of single men, even among first-timers.
Because buyers are older now on average, some first-time buyers are actually in mid-life: it’s not unheard of for people in their 40s or 50s to finally buy their first home. In fact, around 21% of homebuyers aged 43–57 were first-time buyers, indicating that a portion of first-timers are mid-career individuals who rented for decades prior.
Homeownership Challenges
The steep hurdles facing young Californians help explain these demographics. California has the second-lowest homeownership rate in the U.S. (about 55–56%), trailing only New York. Even though the population of adults aged 25–34 (prime first-time buyer age) grew by 17% from 2008 to 2018, homeownership did not rise in tandem.
In 2018 the state’s homeownership rate was ~55%, down from a peak of ~61% in 2006 before the housing crash. Researchers note that student debt, high rents, and low housing inventory have made it difficult for the young generation to break into the market.
Despite these obstacles, owning a home remains a strong aspiration. According to the National Association of Realtors, 84% of young adults (ages 23–31) believe buying a home is a good financial investment.
What Kinds of Homes Are First-Time Buyers Purchasing?
Single-Family Homes
A detached single-family house is still the most common type of home that first-time buyers pursue, even if it’s a small one. Nationally, about 75% of recent homebuyers bought detached single-family houses.
In California, many first-timers manage to buy older starter houses or smaller homes on the outskirts of metro areas. These homes often have two or three bedrooms and are less than 1,500 square feet – cozy by California standards.
Buying a single-family home often means “upsizing” in space for those coming from a tiny apartment. For example, moving from a one-bedroom rental into a three-bedroom house is a significant upsize in living space, giving new owners room to start a family or accommodate a home office. Over 60% of first-time buyers cite the desire for more space or a yard as a motivation for purchasing a home.
Condos and Townhomes
Condominiums and townhouses have become popular starter homes, especially in expensive urban markets like the Bay Area and Los Angeles. Condos and townhomes are typically less costly than detached houses in the same area. For example, a condo might sell for hundreds of thousands of dollars less than a comparable house in Los Angeles.
First-time buyers who want to live in the city or close to jobs often choose condos as their entry point. Condos also appeal to those who don’t want the maintenance of a yard or who like the amenities (gyms, pools) that condo complexes can offer.
While national data shows only ~7% of buyers purchased townhouses, in California’s priciest counties the share of first-timers buying condos/townhomes is much higher. Homebuilders have constructed many new townhome-style condos in suburbs around San Francisco, Los Angeles, and San Diego specifically marketed as affordable options for first-time buyers.
Older Homes and “Fixers”
Another trend is that first-time buyers are often purchasing older homes or even fixer-uppers. Since brand-new houses are typically luxury-priced in California, entry-level buyers look to the resale market.
It’s common for first-timers to buy houses built in the 1950s-1980s that may need some cosmetic updating. The NAR reports the typical home purchased in recent years was built around 1994 – meaning many homes are several decades old.
Buying an older house can be more affordable, but the new owners may have to gradually invest in repairs (a new roof, updating old plumbing, etc.). Some ambitious first-timers intentionally buy “fixer-upper” homes – houses in need of significant renovation – because they are priced lower.
Financing Trends: Mortgages, Interest Rates, and Down Payments
Mortgage Types (Conventional vs. FHA)
First-time buyers typically use one of two main types of mortgages: conventional loans or FHA loans. Conventional loans are those provided by banks or mortgage companies and often sold to Fannie Mae/Freddie Mac; they usually require good credit and a down payment (often 5–20%).
FHA loans, insured by the Federal Housing Administration, allow lower credit scores and down payments as low as 3.5%, making them popular with first-timers. However, FHA loans have limits on how much you can borrow, which can be a problem in high-cost California.
Over the past decade, there’s been a trend of declining FHA usage among first-time buyers as more have shifted to conventional loans with private mortgage insurance. In 2009, roughly 55% of first-time buyers nationally used FHA loans. By 2024, only 29% of first-time buyers used FHA loans, while 52% used conventional loans (the rest used VA or other programs).
Many California first-timers in 2018–2023 opted for 30-year fixed-rate conventional mortgages with low down payments (often putting 5-10% down and paying private mortgage insurance) instead of FHA. In expensive markets, FHA loan limits might not cover the cost of a median home, and sellers often prefer buyers with conventional financing.
Interest Rates Rollercoaster
One of the most dramatic shifts in 2018–2023 was the rise and fall (and rise) of mortgage interest rates. In 2018, a typical 30-year fixed mortgage rate was around 4–5%. Then came the pandemic: by 2020 and 2021, interest rates fell to historic lows around 3% for a 30-year mortgage.
These ultra-low rates were a boon for first-time buyers who could qualify, because it made monthly payments more affordable and allowed them to borrow more. Many first-timers rushed to buy in 2020–2021 to take advantage of 3% mortgage rates.
Starting in 2022, the situation reversed – the Federal Reserve raised rates to combat inflation, and mortgage rates soared to around 7% by late 2022 and into 2023. By October 2023, rates hit roughly 7.6% for a 30-year loan, the highest in decades.
For first-time buyers, this jump was a game changer. Higher interest rates dramatically increase the monthly payment on a given loan amount. For example, a $500,000 loan at 3% has a principal+interest payment of about $2,100, but at 7% the payment jumps to about $3,300.
The Legislative Analyst’s Office noted that by March 2024, the monthly payment on a “bottom-tier” starter home in California was 87% higher than it was in January 2020 due to the combination of price increases and interest rate hikes.
Down Payments and Assistance
Coming up with a down payment is one of the biggest hurdles for first-time buyers. In California’s pricey market, a traditional 20% down payment can be enormous – often $100,000 or more. Few first-time buyers manage to put 20% down. In fact, saving a full 20% down in California could take nearly 28 years for the typical household at the state’s high cost levels.
Thus, most first-timers use much smaller down payments. Many loans are available with 3-5% down, and these have become standard for young buyers. According to U.S. Mortgage Insurers, in 2021 over 134,000 Californians bought homes using private mortgage insurance (PMI) to enable low down payments – and 72% of those were first-time buyers.
On average, recent first-time buyers nationwide financed about 94% of their home’s price (meaning they put roughly 6% down). Down payment assistance programs have also played a role. The California Housing Finance Agency (CalHFA) offers special programs for first-time buyers, such as down payment or closing cost assistance loans.
In 2023, California even launched an innovative program called “Dream For All,” which offered a shared-appreciation loan to cover up to 20% of a home’s price for first-time, first-generation buyers. The response was overwhelming: the $300 million fund for Dream For All was fully allocated in just 11 days, helping about 2,500 first-time buyers with their down payments.
Many first-time buyers also receive financial assistance from family – the so-called “Bank of Mom and Dad.” In 2022–2023, about 25% of first-time buyers used a gift or loan from a relative to help fund their down payment. The majority (around 69%) still used their own savings as the primary source, but the reliance on family support has grown.
Regional Differences: Bay Area vs. Los Angeles vs. Inland Regions
San Francisco Bay Area
The Bay Area (which includes San Francisco, Silicon Valley/San Jose, Oakland, etc.) is one of the most expensive housing markets in the nation. Here, first-time buyers face sky-high home prices. As of early 2023, the median home price in the Bay Area was around $1.25 million in some counties (and even starter homes often cost well over $700,000).
Affordability for first-time buyers is extremely low – in Santa Clara and San Mateo Counties (Silicon Valley), it’s been estimated that only around 20–25% of first-time households can afford a home in recent years.
First-time buyers here are often tech workers with high incomes or folks receiving family help. Many buy condos or TICs (tenancy-in-common units) as a more affordable entry point. Others move farther out – for example, beyond the immediate Bay Area to outer suburbs or even out of the region entirely – to find a home they can afford.
Los Angeles and Orange County
The Los Angeles metro area (LA and Orange County) is also expensive, though generally a bit less so than the Bay Area. In early 2023, median home prices were around $835,000 in Los Angeles and Orange counties.
First-time buyers in LA often look toward condos or smaller single-family homes in outlying neighborhoods. LA is a sprawling region, and affordability varies by area. Coastal communities and prime neighborhoods (e.g., Santa Monica, Irvine) are mostly out of reach for first-timers unless they have very high incomes.
Instead, many first-time buyers purchase in the San Fernando Valley, East LA, South Bay inland cities, or northern Orange County – places where prices, while high, are slightly more attainable. For example, a starter townhouse in the San Fernando Valley might be $600,000, which is steep but feasible for a dual-income household making around $120,000/year with a low-down-payment loan.
Inland Empire (Riverside & San Bernardino Counties)
The Inland Empire, east of Los Angeles, has been a magnet for first-time buyers because of its relatively lower home prices. The median home price in the Inland Empire was about $511,000 in early 2023, which, while half a million dollars, was significantly cheaper (roughly 40% less) than coastal Southern California prices.
This price gap led many first-time buyers who work in LA or Orange County to purchase homes in the Inland Empire and commute (or telecommute). Housing affordability rates in the Inland Empire are the highest in Southern California – for example, in San Bernardino County, around 59% of households could afford an entry-level home in early 2022, far above the statewide affordability rate.
Areas like Corona, Riverside, Ontario, and Fontana saw a lot of young families buying their first homes (often new construction in large subdivisions). Builders in the Inland Empire produced many new single-family homes targeted at first-time buyers, typically more affordable than anything new near the coast.
Sacramento and Central Valley
The Central Valley and the Sacramento region offer comparatively more affordable markets for first-time buyers. Sacramento, the state capital, saw an influx of Bay Area remote workers during the pandemic, which drove its prices up, but it’s still cheaper than the coastal cities.
The median price in the Sacramento area might be around $500,000-$600,000, making it feasible for many first-time buyers with moderate incomes. In cities like Stockton, Modesto, Fresno, Bakersfield, etc., home prices range much lower (some in the $300k–$400k range for median prices).
This means a much larger percentage of local first-time buyers can afford homes (though incomes are also lower in these areas). Homeownership rates are higher in these inland regions; for example, the homeownership rate in Fresno County is around 60%, above the California average, partly because entry-level homes are more attainable.
Comparison to 2008–2017: Then vs. Now
Housing Market Conditions
The 2008–2012 period was defined by the Great Recession and housing crash, whereas 2018–2023 was defined by a strong market that overheated during the pandemic and then cooled when rates rose.
In the late 2000s, California home prices plummeted after the 2007 bubble burst, leading to large numbers of foreclosures. For first-time buyers with secure jobs or savings, the early 2010s provided a rare opportunity to buy homes at significantly lower prices.
Indeed, many did: during 2009–2010, there was a major effort to stimulate home sales – the federal government offered a First-Time Homebuyer Tax Credit up to $8,000, which brought a wave of new buyers into the market. This helped push the first-time buyer share to around 50% of purchases in 2010, an all-time high.
By contrast, 2018–2021 saw rapidly rising home prices, setting new records year after year, which hurt affordability. In 2022 the market didn’t crash but sales slowed due to interest rates.
As mentioned, around 2009–2010 roughly half of buyers were first-timers, thanks to low prices and tax incentives. This was unusual – historically the share is about 38%.
After 2010, the first-timer share fell below normal. From 2011 through about 2017, first-time buyers made up roughly 30%–35% of purchasers, a bit under the long-term average. Fast forward to 2018–2023, the share hovered around one-third until it collapsed to 26% in 2022 – the lowest ever.
The record low 26% in 2022 is the mirror image of the record high ~50% in 2010. In 2023 it ticked back up to the low-30s. So essentially, first-time buyers went from unusually important in 2009–2010 to unusually scarce in 2021–2022.
Conclusion
Buying a first home in California between 2018 and 2023 has been a journey full of challenges, adaptations, and delays for many households. The trends show a portrait of first-time buyers who are generally older, higher-income, and fewer in number than in past generations.
They have had to navigate a market with record-high prices and fierce competition, often compromising on the type or location of home to make it work. Most are focusing on primary residences like single-family houses, condos, or townhomes, with only a few venturing into multi-unit investments or early vacation homes.
The data indicates that many first-time buyers are stretching financially – using low-down-payment loans, tapping family assistance, and coping with sharply higher interest rates.
Regionally, California is almost like multiple states: first-timers in the Bay Area and coastal metros face extreme affordability barriers, whereas those in inland regions find relatively more opportunities. This has led to migration patterns (people moving to where they can afford homes) and creative strategies like long commutes or remote work arrangements for some.
Looking ahead, the demand from millennials and Gen Z entering their homebuying years is expected to remain strong. The key questions will be whether California can create enough affordable housing supply and whether financing conditions (interest rates, credit availability) can accommodate these buyers.
While the road to that first set of house keys has gotten longer and harder, thousands of Californians each year are still achieving it – buying everything from downtown condos to suburban starter homes – and in doing so, they are shaping the next chapter of the California Dream.
References
- NAR Finds Share of First-Time Home Buyers Smaller, Older Than Ever Before | MetroTex
- First-time home buyers income hits record high | National Mortgage News
- California Housing Finance Agency down payment assistance program paused after all of its $300 million in funds were used up | ABC7 Los Angeles
- Press Release: California Ranks #2 in the U.S. for Low Down Payment Mortgage Lending in 2021 | USMI
- California Housing Affordability Tracker (1st Quarter 2025) | Legislative Analyst’s Office
- Housing crisis worsened in California over last 30 years | CalMatters
- Will first-time homebuyers save California’s homeownership rate? | firsttuesday Journal
- Highlights From the Profile of Home Buyers and Sellers | National Association of REALTORS®
- First-Time Homebuyer Statistics | Self Financial
- NAR says vacation home sales are hot | HBS Dealer
- Vacation, Resort, and Second Homes | National Association of REALTORS®
- Housing Affordability | San Bernardino County Community Indicators
- Economic, Housing and Mortgage Market Outlook – October 2024 | Freddie Mac
- Only 1 out of every 805 homes for sale is affordable for Silicon Valley’s middle class | Palo Alto Online
- How the rate of first-time home buying has changed over time | KTVZ
