First-time buyers lean on family as mortgage rates hit 7%

Pandemic rates are gone

Mortgage rates have climbed back to 7% after falling to 5.98% on February 26. First-time buyers who saw sub-3% rates during the pandemic now face today's market head-on.

“no low-rate mortgage to surrender”

The comparison trap

Odeta Kushi, deputy chief economist at First American Financial Corporation, says younger buyers used sub-3% rates as their reference point, even though those rates were historically exceptional.

“For many younger buyers, mortgage rates below 3% became their reference point, even though those rates were historically exceptional.”

Rates spike again in October

Mortgage rates averaged 7.40% the weeks of October 8 and October 15, the highest since November 2023. Meanwhile, the average existing home price is still about 25% higher than when the pandemic started.

The double squeeze

Ken Sisson, an associate broker with Christie's International Real Estate Southern California in Los Angeles, says first-time buyers face two problems: high mortgage rates and home prices driven up by pandemic-era low rates.

“The mortgage rates obviously are half of the story related to that affordability challenge. The other half of the story is the home prices.”

The down payment hurdle

Unlike repeat buyers, first-time buyers have no home equity to put toward a purchase. Kushi identified nearly 1.3 million shadow homeowners, young adults living with family who could become future homeowners.

“Even when someone earns enough to comfortably afford a monthly mortgage payment, saving tens of thousands of dollars for a down payment and closing costs can take years.”

Family wealth transfers surge

Veronique Perrin, a real estate agent at Christie's International Real Estate New York, says there is a massive transfer of wealth from boomers happening, with gifting in most deals she works on.

“There is currently a massive transfer of wealth from boomers going on.”

One-quarter get family help

Nationally, 25% of first-time buyers used a gift or loan from family or friends toward their down payment, according to the National Association of Realtors' 2026 Profile of Home Buyers and Sellers.

Today's market has some advantages

Odeta Kushi notes that today's buyers face higher costs but have negotiating power. Homes sit longer on the market, buyers have more choices, and sellers are more willing to negotiate price or offer concessions.

“There's something to be said for having the time and negotiating power to find the right home at the right price.”