First-time home buyers who have long been thwarted from entering the real estate market by rising prices and interest rates may see a little relief in 2019, according to the National Association of Realtors’ annual buyer and seller profile. The survey covers from July 2017 to June 2018.
“Low inventory, rising interest rates, and student loan debt are all factors contributing to the suppression of first-time home buyers,” Lawrence Yun, chief economist for NAR, said in a statement. “However, existing-home sales data shows inventory has been rising slowly on a year-over-year basis in recent months, which may encourage more would-be buyers who were previously convinced they could not find a home to enter the market.”
But where are buyers going?
Younger buyers are heading into the suburbs, according to Jessica Lautz, NAR’s managing director of survey research and communication. “Many millennials are moving to the suburbs because it’s more affordable, especially in higher-priced markets,” Lautz said.
Rising student loan debt is a major factor keeping them out of the market. “Every year we’ve collected the data, the amount of debt has gone up,” Lautz said. In 2017, 34 percent of buyers were first-timers; this year that figure was 33 percent, according to the report.
Despite the mounting debt, millennials are the largest demographic of home buyers, she said. That number would be higher, she said, but the cost of construction materials and labor are rising, and strict zoning regulations make building housing especially difficult and expensive.
The report found that single female buyers were outpacing their male counterparts.
“For the second year in a row, single female buyers accounted for 18 percent of all buyers,” according to the report. “The group was the second most common household-buyer type behind married couples (63 percent). Single male buyers came in third and accounted for half the number of buyers as their female counterparts (9 percent). However, single males tended to purchase more expensive homes, with a median price of $215,000, compared with single females, at a median price of $189,000 (the lowest of all household buyer types).”
And buyers are putting down bigger down payments. The average buyer put down 13 percent, up from 10 percent last year. Lautz attributed the increase to the growing number of first-time home buyers who received financial help and the number of move-up buyers using equity in their homes.
The competition for those homes may also be a factor.
Historically low inventory is driving prices up, and reasonably priced homes are selling very quickly across the country, according to NAR. You might think that would drive more sellers to try to sell their homes without a real estate agent and pocket the savings, but the opposite is happening.
A record-low 7 percent of sellers sold their homes without a real estate agent last year. This number has been steadily declining since it peaked in 1981, when 15 percent of owners sold their homes themselves, according to the report.
“I think one of the things happening here is the lingering psychological after-effects of the recession,” Lautz said. “Prices have mostly rebounded, and sellers want to be sure they don’t leave money on the table. They know they don’t know how to price and market the home in today’s market. They don’t want to do it alone. They want a professional.”