The latest home buyers and sellers research from the National Association of Realtors reveals that despite an improving job market and low interest rates, the share of first-time buyers has fallen to its lowest point in nearly three decades.
The annual survey (Which evaluates the demographics, preferences, motivations, plans and experiences of recent home buyers and sellers) shows that the share of first-time buyers in the market has dropped 5 per cent points from a year ago to 33 per cent, representing the lowest share since 1987 (30 per cent).
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.
The figures arrive as investors lower their share of US property purchases amid an improving financial picture for domestic buyers. Nonetheless, Lawrence Yun, NAR chief economist, says there are many obstacles young adults are still facing 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 explains. “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.”
This shortfall is preventing a healthier housing market from reaching its full potential, according to the NAR report.
“Stronger job growth should eventually support higher wages,” adds Yun, “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 their 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.
Source: The Movechannel