First-time home buyers comprised 31 percent of closed sales in August, according to the
REALTORS® Confidence Index Survey. While the share of first-time buyers has seen gradual improvement since the lows of less than 30 percent in 2013, many potential buyers still are on the sidelines, according to the National Association of REALTORS®’ report.
The homeownership rate in the second quarter for those under the age of 35 only increased slightly to 35.3 percent (from 34.3 percent in the first quarter). The homeownership rate for the 35- to 44-year-old age group posted a slight decrease to 58.8 percent from 59 percent in the first quarter.
NAR writes on its Economists’ Outlook blog that there are 6 million fewer households within those age groups that own homes in 2016 compared to 2005.
The environment may be good for first-time buyers, particularly since employment has been growing and interest rates are at historic lows. However, young adults face many setbacks into homeownership, such as difficulties in obtaining credit, high price growth compared to income growth, and student debt.
While employment has been rising, incomes continue to lag. For example, since January 2012, home prices have risen 68 percent, a four-fold increase compared to only a 15 percent gain in median household income, NAR notes.
Also, the lack of inventory of homes for sale is another factor hampering would-be buyers from entering the market. Housing starts have not kept pace with the 1.5 million estimated demand coming from net household formation (about 1.2 million) and units needed to replace obsolete or destroyed homes, according to NAR’s Economists’ Outlook blog.
"Market conditions continue to be stressful and challenging for both prospective first-time buyers and homeowners looking to trade up," Lawrence Yun, NAR’s chief economist, said in a statement after NAR’s release of its latest report on existing-home sales, which showed
sales subsiding 1.7 percent in August. "The ongoing rise in home prices is straining the budgets of some of these would-be buyers, and what is available for sale is moving off the market quickly because supply remains minimal in the lower- and mid-price ranges."
Source: “Potential First-Time Buyers Still on the Sidelines,” National Association of REALTORS®’ Economists’ Outlook blog (Sept. 21, 2017)
