The report states that only 33% of homes purchased in 2016 were by first-time home buyers, down from the 39% reported the previous year. This is the lowest percentage of first-time home buyers since 1987.
The decrease in first-time home buyers is concerning because they are considered a major driving force for the housing market. They are essential for the market’s growth, particularly since existing homeowners tend to buy and sell much less frequently. Since existing homeowners only contribute to the market when they choose to move, first-time homebuyers are vital to keep the housing market fluid. The decrease in first-time homebuyers could be a sign that the current housing market is not providing enough incentives or opportunities for first-time buyers.
The NAR report also identified several factors that could explain why first-time home buyers are being dissuaded from participating in the housing market. One factor is that the number of available houses on the market has decreased significantly since 2013. This has caused a high competition between buyers, escalating prices and making it difficult for first-time home buyers to find an affordable home.
In addition, the NAR report found that the rising cost of renting is causing some people to stay in their rental homes longer rather than purchase a home. With rents increasing faster than incomes, many potential buyers simply can’t afford to make the transition from renting to owning a home. Furthermore, most millennials, who account for the majority of the first-time home buyers, are burdened with debt from student loans and other financial obligations, making it difficult to save up for a down payment.
Finally, the NAR report found that the current mortgage qualification process is very complicated and often requires a great deal of paperwork. This can be particularly intimidating for first-time home buyers, who may not have experience dealing with banks and lenders.
The decrease in first-time homebuyers is worrisome because it could signal a decline in the housing market if the trend persists. In order to encourage more first-time home buyers to participate in the market, lawmakers and financial institutions should find ways to make the qualification process simpler and more accessible. Additionally, the government should create incentives and programs to help first-time buyers buy a home.
In conclusion, the recent NAR report indicates that the percentage of first-time home buyers has dropped to an all-time low of 33%. This is concerning because first-time buyers are essential for the health of the housing market. Several factors such as the shortage of housing inventory, rising rent costs, and complicated mortgage qualification process could be contributing to the decrease. In order to encourage more first-time home buyers to participate in the market, lawmakers and financial institutions should create incentives and programs to make it easier and more accessible for them to purchase a home.
This article was contributed on Nov 11, 2023