New Research Shows Housing Is Affordable For First-Time Buyers

Home prices have been on the rise for the last seven years,leading many housing market analysts to conclude that first-timehomebuyers are being shut out of the market due to affordabilityconcerns.

The National Association of Realtors (NAR)reports on the percentage of First-Time Home Buyers (FTHB) on amonthly and yearly basis. Their latest report shows that FTHB’s made up 33% ofbuyers in March, which matches their reported share in 2018.

NAR uses survey data from their members to come up with thisstatistic, so their results do not include every transactioncompleted. Rather, they only the transactions reported by memberswho complete the survey.

The other entity that reports on FTHB share isthe American Enterprise Institute (AEI). The AEIuses data from mortgage applications that define an FTHBas “any borrower who did not have a mortgage for thepreceding three years.”

This means the AEI measurement also includes former homeownerswho transitioned out of a home they previously owned and re-enteredthe market after at least 3 years. The latest FTHB share data fromAEI shows that first-time buyers made up 57.5% of allmortgages in August 2018. NAR’s data shows a 31% share forthe same time period.

New research from the New York FederalReserve shows that these traditional reports on FTHBshare have been unable to give an accurate depiction of thisgroup’s involvement in the market.

The NY Fed was able to take consumer creditdata and identify when a mortgage payment entered aconsumer’s credit report to determine when a first-time homepurchase was made. Using this data, they were able to show thatAEI’s reported FTHB share was consistently 10% higher. TheNAR reports were right on par with their findings until 2010, whenNAR’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 asmany analysts had believed. Buying a home is very much a part ofthe American Dream for younger generations, just like it had beenfor their parents and grandparents.

This also means that rising prices have not scared buyers awayfrom the market. Many first-time buyers are making sacrifices tosave their down payment and make their dream a reality.

Bottom Line

If you are one of the many renters who is scrolling throughlistings on your phone every night dreaming of buying your ownhome, there are opportunities in every market to make that dream areality!