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August 31, 2014

What's Holding First-Timers Back?

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What's Holding First-Timers Back?

First-time home buyers accounted for 28 percent of existing-home purchases in May—down from 34 percent a year prior, according to the National Association of REALTORS®. Traditionally, first-time home buyers account for four of 10 home buyers, so their dwindling numbers are alarming some housing analysts and economists. 

As home prices rise, first-time home buyers may increasingly get left on the sidelines. Home prices have posted double-digit gains in the last year in many markets, and average mortgage rates are ticking up above 4 percent. Some first-time home buyers may have already missed the prime conditions to jump into home ownership.

"The people buying homes today… are participating in home price growth. Younger people, they are being left out," says Lawrence Yun, chief economist for NAR. "It remains to be seen when the first-time buyer can return."

First-time home buyers are “critical to a housing recovery because they help existing-home owners sell and move up to larger or more expensive homes,” USA Today reports.

First-time home buyers are being limited by a range of factors. They face competition from investors and tight credit conditions that are making it more difficult to qualify for a home loan.

The still looming aftereffects of the recession also represent a problem for some. The recession hit the 25- to 34-year-old age group hardest with high unemployment, coupled with the fact that this age group is also facing high levels of student loan debt—factors that have delayed home ownership for the younger generation. 

Source: “First-time buyers losing out as home sales rise,” USA Today (June 29, 2013)

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Are First-Time Buyers Being Shut Out?