Difficult Time for First-Time Homebuyers

Despite good mortgage rates and a strong job market first-time homebuyers are having a difficult time in the current market. According to the National Association of Realtors’ 2017 Profile of Home Buyers and Sellers the percentage of first-time homebuyers declined slightly in the last year to 34 percent.

Fist0time buyers made average down payments of 5 percent in the last year, down from 6 percent in 2016.

One of the biggest obstacles for first-time buyers is student debt. Over 40 percent of first-time home buyers have student loans, averaging $29,000.

Share

First-Time Buyers Increasing … Slowly

The National Association of Realtors reports in it’s recent Profile of Home Buyers and Sellers that first-time buyers accounted for 35 percent of home sales in the U.S. between July 2015 and July 2016. While this is a 3 percent increase from the previous year it remains significantly lower that the 40 percent which has been the norm.

Growing wages was cited as a prime factor in the increase as well as continued low mortgage interest rates.

Nevertheless, the down payment remains the largest obstacle for homebuyers with nearly 50 percent having difficulties due to student loans while 40 percent pointed to high credit card debt.

Share

New Homes: Bigger and Costlier

As mentioned in a recent post – Buyers Looking for Extra Space – the current trend is for larger unit size in new residential construction. In fact, the average size of a new home rose to 2,720 square feet in 2015, a considerable increase over the average of 2,660 in 2014. Nearly 50 percent of the homes built in 2015 had four or more bedrooms and 25 percent of those had garages that would hold three or more vehicles.

However, the National Association of Home Builders reports that average price of a new home in 2015 was $351,000, an increase of $100,000 from 2009.

Given the price of land, construction costs and the difficulty many first-time buyers have securing a loan, much of the this construction is aimed at the high-end or luxury market. Many analysts expected the average home size to fall as first-time buyers entered the market but so far, at least, this hasn’t been the case.

Share

New Homes Getting Smaller?

Well, yes – but only slightly.

The Wall Street Journal reports that the size of new homes dropped 40 square feet in the second quarter to 2,479 square feet. This is down from the previous high set in the first quarter of 2015.

According to analysts, the decrease in size could be a sign that builders are focusing more on affordable, entry-level homes. In fact, the National Association of Home Builders predicts that first-time buyers will comprise 18 percent of the market in 2015. While this is a 2 percent increase over 2014 it is far of short of the approximately 26 percent share that first-time buyers comprised in the housing market in the years 2001 to 2006.

Share

Home Sales: Best Since 2007

According to The Associated Press, home sales in the United States are on pace for their best year since 2007. The job market remains strong, mortgage rates are still low but rapidly rising home prices and the potential of rising loan rates is causing many buyers to act fast. Moreover, many of these buyers are in the housing market for the first time.

According to experts, “demand is off the charts in 2015” with June 2015 the fourth consecutive month of the sales rate exceeding 5 million homes. The median home price now sits at $236,400, higher than the July 2006 peak.

With unemployment down to 5.5 percent – down from 6.3 percent a year ago – many would-be buyers are more confident about their own future and this is strongly reflected in their desire to purchase a new home.

Share

Young Professionals Ready to Buy

Although the housing market began it’s turnaround in 2012, many first-time buyers and young professionals have been unable to join in due to questions in the labor market and a sluggish increase in wages. Many of these professionals have been forced to rent or move in with their parents. At last, this seems to be changing.

According to analysts, an increase in jobs and a subsequent increase in wages means that many of this group will be first-time buyers in 2015. It is reported that incomes should rise an average of 1.7 percent, the highest increase since 2008. For workers under the age of 45 this increase is expected to be 4.7 percent. Good news, all around.

Share

Return of the First-time Buyer?

According to Stephen Kim of Barclays, first-time home buyers may be making a resurgence, an area that has remained soft for quite some time. Kim cites the growing number of new jobs that have been created over the last several years as a prime factor. He also points out that credit has loosed somewhat with more lenders now accepting borrowers in the 600-700 FICO range. Finally, he points out that buying remains 20 percent cheaper than renting and young would-be owners will be prompted to buy now rather than wait until prices rise. However, Kim stressed that student loan debt remains a huge obstacle for many first-time hopefuls.

Share