Young First-Time Home Buyers are being Shut Out of the Market

Posted on June 8, 2017


According to Lauren Kusisto of The Wall Street Journal, over the past decade, reportedly three million potential first time home buyers have been pushed out of the housing market. The factors primarily causing this occurrence, especially with young people who make up the majority of the first-time buyer population, include banks’ tight lending standards, acute shortages of affordable housing, as well as the additional expenses that young people are commonly having to deal with such as tight credit, student loans, and increasing costs of rent that make it difficult for potential buyers to save up for down payments.

Sam Khater of CoreLogic Inc. states, “What’s been missing [in the younger demographic of first-time buyers] is confidence.”

Lawrence Yun of the National Association of Realtors said, “They [first-time buyers] provide that greater mobility to the overall housing market. Without first time buyers the market becomes much more stagnant and less dynamic.” In other words, this absence of demand from first-time buyers causes the overall housing market to become more idle in its progression, which is an unhealthy state for any economic market and partially the reason for the prolonged recovery of the housing market.

According to a new study by Genworth Mortgage Insurance, there were 1.5 million first-time home buyers per year over the last decade. This average is less than the 1.8 million historical average of first-time buyers recorded since 1994 (hence the calculated difference of 3 million over 10 years). Also, to be clear this study defined a “first-time buyer” as anyone who hasn’t owned a home in the last 3 years.

Although the numbers have been down for the past 10 years, this year seems to show some promise. Since the start of 2017, first-time buyers have represented 38% of the market, which is greater than the historical average of 35% (Genworth). The factors causing this recent surge could be many of these people entering their 30s, getting married, having kids and therefore needing more space than they can normally get through renting.

This increasing demand from first time home buyers has prompted home builders to start building less expensive homes which is quite a change-up after focusing on building upscale homes for the upper end of the market. This focus over the last few years could be due to many people in the Baby-Boomer generation entering retirement, purchasing these upscale homes with the money from a lifetime’s wages. Therefore while these people are retiring, the upcoming generation is the one filling these gaps of the market, but with the demand for more affordable houses.

Last year, the median size of a new single-family home fell 2% to 2,422 square feet (Census Bureau data). Although this change seems minor, it proves to be significant in that it is the first time this statistic has fallen since 2009 and just the third time it’s fallen in the last 20 years.

While there is currently a clear surge in the number of first time home buyers, the number of repeat buyers is significantly lower than the historical average. According to Genworth, only 1.6 million repeat buyers made home purchases in the last year, compared with the 2.4 million a year average over the last 22 years.

Find more information in Kusisto’s article.

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Marketing Intern
Charles Rowe is currently an undergraduate student at Birmingham-Southern College. Charles joined the Navigate Team this June as a Marketing and Social Media Intern. He has experience in social media and video and is using his skills to make known the Navigate Housing brand to the American community.