Home prices have been on the rise for the last seven years, leading many housing market analysts to conclude that first-time homebuyers are being shut out of the market due to affordability concerns.
The National Association of Realtors (NAR) reports on the percentage of First-Time Home Buyers (FTHB) on a monthly and yearly basis. Their latest report shows that FTHB’s made up 33% of buyers in March, which matches their reported share in 2018.
NAR uses survey data from their members to come up with this statistic, so their results do not include every transaction completed. Rather, they only show the transactions reported by members who complete the survey.
The other entity that reports on FTHB share is the American Enterprise Institute (AEI). The AEI uses data from mortgage applications that define an FTHB as “any borrower who did not have a mortgage for the preceding three years.”
This means the AEI measurement also includes former homeowners who transitioned out of a home they previously owned and re-entered the market after at least 3 years. The latest FTHB share data from AEI shows that first-time buyers made up 57.5% of all mortgages in August 2018. NAR’s data shows a 31% share for the same time period.
New research from the New York Federal Reserve shows that these traditional reports on FTHB share have been unable to give an accurate depiction of this group’s involvement in the market.
The NY Fed was able to take consumer credit data and identify when a mortgage payment entered a consumer’s credit report to determine when a first-time home purchase was made. Using this data, they were able to show that AEI’s reported FTHB share was consistently 10% higher. The NAR reports were right on par with their findings until 2010, when NAR’s share dropped to the 11% gap seen today.
So, what does this all mean?
First-time home buyers have not disappeared from the market as many analysts had believed. Buying a home is very much a part of the American Dream for younger generations, just like it had been for their parents and grandparents.
This also means that rising prices have not scared buyers away from the market. Many first-time buyers are making sacrifices to save their down payment and make their dream a reality.
Bottom Line
If you are one of the many renters who is scrolling through listings on your phone every night dreaming of buying your own home, there are opportunities in every market to make that dream a reality!
The Cost of Renting vs. Buying This Spring
- Historically, the choice between renting or buying a home has been a tough decision.
- Looking at the percentage of income needed to rent a median-priced home today (27.7%) vs. the percentage needed to buy a median-priced home (17.5%), the choice becomes obvious.
- Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!
4 Reasons Why Fall Is A Great Time to Buy A Home!
Here are four great reasons to consider buying a home today instead of waiting.
1. Prices Will Continue to Rise
CoreLogic’s latest Home Price Insights report reveals that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.1% over the next year.
Home values will continue to appreciate for years. Waiting no longer makes sense.
2. Mortgage Interest Rates Are Projected to Increase
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have already increased by half of a percentage point, to around 4.5% in 2018. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by half a percentage point to around 5.1% by this time next year.
An increase in rates will impact your monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
3. Either Way, You Are Paying a Mortgage
There are some renters who have not yet purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home which you can then tap into later in life. As a renter, you guarantee your landlord is the person building that equity.
Are you ready to put your housing cost to work for you?
4. It’s Time to Move on with Your Life
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.
If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings. Give us a call to help you through the process.
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