WASHINGTON – Nov. 4, 2014 – Despite an improving job market and low interest rates, the percentage of first-time buyers fell to its lowest point in nearly three decades.

According to the 2014 National Association of Realtors® (NAR) Profile of Home Buyers and Sellers, the drop in first-time buyers is holding back the housing recovery and preventing the market from reaching its full potential.

The long-term average in NAR's survey, which dates back to 1981, finds that four out of 10 purchases are from first-time homebuyers. In this year's survey, however, the share of first-time buyers dropped 5 percentage points from a year ago to 33 percent – the lowest share since 1987 (30 percent). Results represent owner-occupants and do not include investors or vacation homes.

"Rising rents and repaying student loan debt makes saving for a downpayment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce," says Lawrence Yun, NAR chief economist. "Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums."

Yun says stronger job growth should eventually support higher wages, but "nearly half (47 percent) of first-time buyers in this year's survey said the mortgage application and approval process was 'much more' or 'somewhat more' difficult than expected. Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years."

The household composition of buyers responding to the survey was mostly unchanged from a year ago. Sixty-five percent of buyers were married couples, 16 percent single women, 9 percent single men and 8 percent unmarried couples.

In 2009, 60 percent of buyers were married, 21 percent were single women, 10 percent single men and 8 percent unmarried couples. Thirteen percent of survey respondents were multi-generational households, including adult children, parents and/or grandparents.

The median age of first-time buyers was 31, unchanged from the last two years, and the median income was $68,300 ($67,400 in 2013). The typical first-time buyer purchased a 1,570 square-foot home costing $169,000, while the typical repeat buyer was 53 years old and earned $95,000. Repeat buyers purchased a median 2,030-square foot home costing $240,000.

When asked about the primary reason for purchasing, 53 percent of first-time buyers cited a desire to own a home of their own. For repeat buyers, 12 percent had a job-related move, 11 percent wanted a home in a better area, and another 10 percent said they wanted a larger home. Responses for other reasons were in the single digits.

According to the survey, 79 percent of recent buyers said their home is a good investment, and 40 percent believe it's better than stocks.