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Real Estate Big Data

The average first time home buyer struggles with debt and down payments

(REAL ESTATE NEWS) For years, the first time home buyer has been squeezed out of the market, but for those qualifying, what are the traits of today’s average first timer?

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While the nation’s housing supply tightens and home prices continue to rise, first time home buyers are also struggling to save enough for a down payment while burdened with student loan debt.

As a result, only 34 percent of 2017 home buyers were first time homeowners, a minor decrease from 35 percent in 2016, according to the National Association of Realtors 2017 Profile of Home Buyers and Sellers. This figure continues to fall away from the long-term historical market average of 39 percent, per the NAR.

The typical first time home buyer? A 32-year-old with an average household income of $75,000 who carries some lingering student loan debt.

While millennials are in their prime home buying years, the NAR found debt and saving for a down payment are the most significant home buying hurdles. A quarter (25 percent) of new first time buyers said saving for a down payment was the most difficult task they faced during the process and more than half (55 percent) said student loan debt delayed their home purchase.

Among the surveyed home buying newbies, 41 percent indicated they have student loan debt, which is up from the 40 percent recorded in 2016. And, the average debt balance has increased even more in the past year, reaching an average of $29,000 compared to $26,000 in 2016. More than half of debt-carrying buyers owe at least $25,000, too.

The typical first time home? A single-family home in a suburban area with a median purchase price of $190,000. And, as saving for a down payment is difficult for many young buyers, the average first time home buyer down payment averaged 5 percent in 2017, the lowest percentage recorded by the NAR since 2013. The average down payment figure also indicates such buyers finance nearly 10 percent more (95 percent) of their home purchases than repeat buyers (86 percent).

In addition to personal finance burdens, first time buyers have struggled to find affordable options as the housing inventory in many parts of the U.S. tightens and prices increase for what is available. When buyers are on a budget and balancing debt, this can dampen the dreams of homeownership and prolong the time spent searching for their first home. Overall, the 2017 NAR survey found the average home buying search lasts 10 weeks.

Regardless of reality, many currently believe that it’s just too expensive to buy.

“With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home,” said NAR chief economist Lawrence Yun. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

The NAR annual Profile of Buyers and Sellers survey is survey data-based snapshot of home buyers who have purchased a home in the past 12 months, which, for the latest report, meant between July 2016 and June 2017.

While the new first time home buyer stats may not be the most promising, these findings can help real estate professionals better understand the current housing market and better assist home buyers – especially younger buyers who may benefit from more guidance.

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Sienna is a Staff Writer at The Real Daily and has a bachelor's degree in journalism with an emphasis in writing and editing from the University of Wisconsin Oshkosh. She is currently a freelance writer with an affinity for topics that help others better themselves. Sienna loves French-pressed coffee and long walks at the dog park.

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Real Estate Big Data

With housing demand so high, why are sales stagnant?

(REAL ESTATE NEWS) The housing market is on fire, yet some serious constraints are holding back sales levels – let’s discuss.

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If you have a pulse and are on the internet, you already know that the housing market is white hot, with bidding wars in more cities than ever. So why in the world are home sales stagnating?

Pending home sales rose only 0.4 percent in March, according to the National Association of Realtors’ (NAR’s) Pending Home Sales Index (PHSI), decreasing 3.0 percent on an annualized basis – the third consecutive month of annual dips.

Despite a strong economy, NAR points yet again to “unrelenting inventory constraints” which they recently said would only be relieved by builders stepping up production, more homeowners putting their home on the market, and/or investors releasing inventory.

NAR’s Chief Economist, Dr. Lawrence Yun says contract activity is moving sideways and not breaking higher despite the strong job-creating economy.

“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” said Dr. Yun.

He continued, “Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand. What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy.”

Dr. Yun forecasts that existing home sales will hit 5.61 million this year (up slightly from 5.51 million last year), also forecasting the national median home price will rise 4.4 percent.

He notes that affordability and availability are holding back home sales, combined with price appreciation outpacing incomes, and mortgage rates rising, sales will soon peak.

“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” said Yun. “That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth. Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers – especially first-time buyers – will be left on the sidelines.”

This story originally published on April 30, 2018.

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Real Estate Big Data

Home sales surge in half of the nation, slump in the other half

(REAL ESTATE NEWS) Home sales rose last month, despite challenging inventory and affordability conditions – but not in all markets.

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Talk about mixed signals. We ended last week with alarm bells that affordability is restricting the housing market, yet home sales in March actually surged in the Northeast (up 6.3 percent) and Midwest (up 5.7 percent) compared to just one month prior.

Meanwhile, home sales slipped 0.4 percent in the South, and a whopping 3.1 percent in the West. Sales levels in all four regions are lower than they were at this time last year, reinforcing the supply and demand challenges, putting homeownership out of reach for a growing pool of potential buyers.

NAR Chief Economist, Dr. Lawrence Yun has indicated that the only way to loosen the noose is a combination of more current homeowners opting to sell, builders increasing new home production, and investors releasing inventory.

In the last year, the median existing home price rose 5.8 percent to $250,4000 with March as the 73rd consecutive month of annual gains.

The average number of days on market decreased to 30 days from 37 in February and 34 in March of 2017. Half of all home sold were on the market for less than a month, and in some cities, bidding wars and immediate sales are common.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” said Dr. Yun.

That said, there is a silver lining.

NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty notes, “First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range.”

Supply conditions improve in higher up price brackets,” concluded Mendenhall, “which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.”

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Real Estate Big Data

Housing prices rise, outpacing wage increases

(REAL ESTATE NEWS) A new joint report from NAR and realtor.com reveal that affordability conditions are eroding and there are very few cures to this problem.

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Good ol’ economics – housing demand continues to outpace supply, and bidding wars are now common in many cities. On a national scale, affordability is increasingly threatening many peoples’ ability to buy, based on their income.

The realtor.com and National Association of Realtors joint report, the Realtors Affordability Distribution Curve and Score, examines affordability conditions compared to income levels for active inventory in local markets. Higher scores suggest a particular market has more affordable homes in proportion to local income levels.

It’s no surprise that in March, the report indicates the least affordable (in proportion to income) is Hawaii, California, Oregon, the District of Columbia, Montana, and Rhode Island. In these states, households at the median income level can only afford 19 to 23 percent of the active housing inventory.

In contrast, the most affordable states are Ohio, Indiana, Kansas, Iowa, and West Virginia, where a a typical household can afford 54 to 62 percent of all active inventory.

The report also indicates that more local markets are seeing worse affordability conditions compared to last year, with L.A., San Diego, San Jose, Ventura, and San Francisco leading the pack. In these markets, the typical household can only afford 3.0 to 11 percent of homes available for sale in their markets.

The typical household can afford nearly 75 percent of homes for sale in Dayton, OH, Toledo, OH, and Scranton, PA.

NAR’s Chief Economist, Dr. Lawrence Yun stated, “The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers – especially those at the lower end of the market, where demand is the strongest.”

The report makes even more apparent why first-time buyers “struggle finding affordable properties to buy and are making up less than a third of home sales so far this year,” said Dr. Yun.

Although wages are on the rise, housing prices are outpacing these increases, and Dr. Yun points to the solution being “more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction.”

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