A little more than a decade in the past, nearly half of homes were offered to first-time buyers.
There have been changes in the technological world.
Today, only 27% of homes sold will be sold to buyers who are first-time buyers. The problem is that there aren’t enough people looking to buy a house since the housing demand was boosted in the wake of this COVID-19-related pandemic. First-time homebuyers have an difficult time getting in to the housing market. What’s the reason? What is the reason for a record-low percentage of homes being offered to buyers who are buying their first homes?
1. The price of homes is rising:
The main reason first-time buyers have a difficult time getting into the market is the huge price of homes.
Prices for homes have increased by nearly 20% over the last year and represent an extraordinary and significant increase that has harmed first-time buyers who tend to be younger, haven’t built up any equity and don’t have the funds to put together a significant down amount.
If the rising cost of homes will be able to slow down in the course of this year is being debated however, the cost for homes is driven by three factors that are interconnected:
Inventory: Housing inventory remains at record low and the ongoing supply chain bottlenecks have left many experts forecasting low inventory levels for the near future.
Inflation: Inflation is at its highest since the last 40 years and is increasing the cost of goods and services for consumers including houses and the building materials needed for their construction.
Investors: The majority of investors purchase one-third of all homes within the U.S., increasing competition for homes. The rising cost of living could lead many investors to flood into the market for housing because the traditional view of real estate is as a secure investment in the face of the devaluation of currency.
In the end, rising costs are the main obstacle for any person – particularly people who are who are making their first purchase who is looking to purchase the home of their dreams.
2. The rising interest and mortgage rates
The price of houses can be a barrier to first-time buyers. However, it’s not the only thing that keeps people who are first time buyers off the market for real estate.
Inflation as well as mortgage interest rate are also pushing homeowners who are first time homebuyers the most.
Think about a couple who is buying their first house. They’re aiming for an amount of $200,000 for their mortgage that’s significantly smaller than the median of several markets. The rates of interest, which were introduced by the Federal Reserve introduced to tamp down inflation, have increased from 2.6 percent to about 5 percent over the past 16 months. What’s the $200,000 mortgage that buyers are looking for? It’s currently more than $200 per month more costly than it was sixteen months ago.
Rising mortgage rates mean the market for affordable homes is now higher than it was the past and potential buyers are to be aware of the likelihood for rates to increase further in the near and long-term
3. Slowing Growth in Wage
As if rising prices for homes and higher mortgage rates were not enough, first-time homebuyers now have to contend with seemingly slowing wages growth.