The downward-drifting participation of first-time homebuyers over the last few years has brought their share of the home buying market to its lowest point in nearly three decades the National Association of Realtors® (NAR) said today. The absence of this critical market force, NAR said, is preventing a healthier housing market from reaching its full potential.
NAR’s survey of which evaluates the demographics, preferences, motivations, plans, and experiences of recent home buyers and sellers, has been conducted since 1981. Over the long term of the survey four of ten primary owner-occupied home purchases have been made by first-timers. The 2014 Profile of Home Buyers and Sellers growing out of that survey puts the first time buyer share this year at 33 percent, down 5 percentage points from last year and the lowest share since 1987 where first time buyers bought only 30 percent of the homes sold.
Despite an improving job market and the continuing low interest rates NAR chief economist Lawrence Yun says there are many obstacles young adults must overcome on their path to homeownership. “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,” he said. “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 adds, “Stronger job growth should eventually support higher wages, but nearly half (47 percent) of first-time buyers in this year’s survey (43 percent in 2013) 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 median age of first-time buyers was 31, unchanged from the last two years, and when asked more than half said their primary reason for purchasing was a desire to own a home of their own. These buyers had a median income of $68,300, $900 more than in 2013, and typically purchased a 1,570 square-foot home costing $169,000.
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed
“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”