October 20, 2016

Young Buyers Face Investor Competition

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Young Buyers Face Investor Competition

There are many reasons why stepping into home ownership is a struggle for many first-time buyers. Young buyers have to deal with housing inventory and affordability issues, high student-loan debt, rising rents in many cities popular with young people, and jobs that don't allow them to save up enough money to move out of their parents' homes.

Read more: More Sales But Conditions Stay Tough for First-Time Buyers

There's another underreported reason why first-time buyers are struggling to buy homes: Competition from investors.

As MONEY Magazine points out, one in four homes sold in October were bought by investors paying cash. These investors often target the same pool of affordable starter homes as young buyers, and rather than flipping the homes right away, investors "turn around and rent these properties to those same young adults for increasing amounts every year," according to the article.

This strategy surely pays off for investors, but does little to help first-time buyers save for a down payment or get out of the rental rut. It also adds to the inventory woes plaguing many markets right now.

“Home supply is diminishing but investor demand is not going away,”  NAR chief economist Lawrence Yun told the Wall Street Journal recently.

A report from NAR showed the lack of affordable inventory nationwide, revealing that between December 2014 and 2015 the number of homes on the market below $100,000 fell 11 percent.

For more information and quick facts, check out NAR's new first-time home buyer infographic.

Source: "This Is the Infuriating Reason Young Adults Can’t Buy Homes Today," MONEY (Feb. 17, 2016)