High home prices and interest rates mean the demographics of the Bay State’s traditional types of home buyers have changed significantly. iStock illustration

The demographic make-up of those buying homes in Massachusetts is changing as a result of record high home prices and low inventories that are squeezing out less affluent first-time buyers.

The net result of today’s market conditions: more affluent buyers, young and old, are now dominating the real estate market across the Bay State, according to real estate industry experts surveyed by Banker & Tradesman.

The type of buyers of single-family houses and condominiums in Massachusetts still fall into four main categories: first-time buyers, trade-up buyers, downsizing buyers and “everybody else,” which includes developers, recently divorced individuals, vacation-home buyers and those buying due to job-related changes.

But within those major categories are major shifts about who’s buying or not buying.

Among younger first-time homebuyers, for instance, those snapping up properties increasingly tend to come from higher-paying sectors, such as finance, life science and technology, and they’re more capable of coming up with larger down-payments to secure mortgages and purchases.

“The people in the market today are definitely higher earners,” said Shant Banosian, executive vice president of Guaranteed Rate in Waltham. “You have to be among the more affluent to land a deal. Today’s market is eliminating many buyers.”

Across the nation, millions of people have been priced out of buying homes due to rising interest rates alone, based on recent research, said Banosian. Add in a low inventory of homes for sale and rising home prices in general, and it’s simply hard for many to compete to buy houses and condos in today’s market, he said.

Income statistics show how daunting it’s become for wannabe homebuyers.

According to data from the Harvard Joint Center for Housing Studies, the household income needed to purchase a home at the median price of $734,000 in the Greater Boston market is about $236,732. The median household income for the area: about $99,400.

First-Time Buyers Shrink

Elliot Schmiedl, director of homeownership at the Massachusetts Housing Partnership, said his organization is seeing an increasing number of first-time homebuyers applying for one of MHP’s three programs designed to help people buy homes.

“Well over 50 percent of the people we deal with simply can’t buy,” said Schmiedl. “The demand by first-time buyers is still high, but they’re on the sidelines these days.”

Andrew Marquis, senior vice president at Cross County Mortgage in Lexington, said his business used to be 50 percent comprised of first-time homebuyers. That number is now down to about 35 percent – and many of the remaining first-timers tend to be more affluent than in the past.

But even the more affluent first-timers are stretching their financial resources in order to buy.

Marquis said he knows of one couple that recently purchased a $850,000 home in Dedham – with a monthly payment of $6,100.

“They just really wanted to own,” he said. “Not all first-timers are out of the equation.”

As for down-payments, Marquis said many younger buyers are “more than ever” getting financial assistance from their parents and other loved ones in order to buy their first homes.

Trade-Up Buyers Stymied

Many trade-up, or move-up, buyers are also constrained by current market forces that discourage them from purchasing larger homes for their growing families.

The reasons: low inventory of homes for sale, record home prices and higher mortgage interest rates that are often more than twice as high as the rates they currently have on their starter homes.

“A lot of these people are staying put,” said Alison Socha, 2023 president of the Greater Boston Association of Realtors and a Realtor at Leading Edge Real Estate in Melrose.

Rather than buying in the current market, she noted some have opted to build additions to their current homes in order to accommodate their growing families, she said.

According to other real estate experts, there’s obviously a lot of trading-up activity in classic bedroom communities with good schools. There’s just not as many trade-up deals as in years past, they say.

With so few homes for sale and so much uncertainty about a prospective homebuyer’s chances of landing a house, many would-be sellers are staying put. iStock illustration

Downsizers Drive the Market

So-called “downsizers,” usually empty nesters looking for smaller homes, are in some ways driving the market – or stalling the market, depending on how one looks at the situation.

Many elder people want to sell their current larger homes, but they’re reluctant to do so as a result of all the challenges facing buyers in general, from the extremely small number of homes for sale to the higher prices and interest rates they might have to pay to downsize.

The Massachusetts Housing Partnership’s Schmiedl said those staying put in their current homes have brought much of the market to a standstill.

“It’s clogged up the entire market,” he said. “It’s been crazy.”

Cross Country Mortgage’s Marquis said elderly people are in a much better position than other potential buyers in today’s real estate market.

They usually have more equity in their current homes, more money stashed away, and more options with lenders to structure buy-sell deals, such as securing bridge loans to make downsizing transactions work. Of course, downsizers can also just stay where they are today.

“The downsizers are in the best shape,” Marquis said. “Their category is best off.”

‘Everybody Else’ Face Unpredictable Market

This “everybody else” category, as one real-estate agent calls it, includes those who can afford to buy second homes for vacations, recently divorced buyers usually looking for smaller homes, and people transferring to the region for new jobs.

There are also developers looking for both single-family and multifamily home deals.

Leading Edge’s Socha said she knows of recent cases of developers winning multiple-bid sales of smaller homes – and then knocking down the houses to build larger abodes.

In general, she said buyers across the real estate spectrum, from first-time home buyers to downsizers, are facing an historically unique time of high demand, low supply and rising interest rates, all contributing to an unpredictable market.

“It’s strange,” she said. “There’s no sane rhythm to anything now.”