Rising Home Prices Squeeze Out Young Buyers

“One can say that we are having a nationwide housing cost problem,” says Lawrence Yun, the chief economist for the National Association of REALTORS®, in a new interview with The Huffington Post. Housing’s affordability problem remains a barrier particularly for first-time buyers wanting to enter the market.

Indeed, the latest existing home sales report shows that the share of first-time home buyers was 28 percent in July, down from 30 percent in June.

The lack of available housing is one cause of these booming prices, with current home building activity at only half of the normal level.

In the recent REALTORS® Confidence Index Survey, REALTORS® report that homes are increasingly becoming unaffordable and that sellers are reluctant to move because they can’t find affordable homes.

Sources: “Real Estate Has Become Unaffordable,” The Huffington Post (Sept. 9, 2015) and “Sales to First-Time Buyers: 28 Percent of Sales in July 2015,” Economist Outlook blog (Sep. 9, 2015)

Are Young Home Buyers Being Left Behind?

Young, first-time buyers are struggling to purchase a home. With low inventories of homes for sale, young first-timers are finding themselves competing against bidders willing to pay cash. Meanwhile, many young buyers are having trouble qualifying for a loan, often due to high student loan debt.

Overall, young buyers have been left out of the housing recovery more than any other age group, according to a new USA Today analysis. The home ownership rate for 25 to 34 year olds has gone from 46.7 percent in 2006 to 29.7 percent in 2011 — a decline of 7 percentage points. As comparison, the 45-54 age group has seen home ownership rates fall 3.8 percent.

National home ownership rates during the same timeframe has fallen 2.7 percentage points — from 67.3 percent to 64.6 percent, USA Today reports.

The median age of first-time home buyers was 31 in 2012, according to National Association of REALTORS® data. First-time home buyers are viewed as critical to a healthy housing market, allowing older Americans to purchase their next home and helping to stimulate new-home construction.

But the number of first-time home buyers has been steadily falling in recent years. In May, first-time buyers accounted for 28 percent of existing-home purchases — a drop from 34 percent a year ago, according to NAR.

Source: “Housing recovery leaves Millennials behind,” USA Today (July 17, 2013)