When we look back on 2017, it will be remembered as the year when market conditions were favorable and first-time homebuyers were eager to buy. Unfortunately, a statewide, indeed nationwide, shortage of homes for sale stopped them cold.
Despite solid interest in buying a home – sparked by steady job gains, record low mortgage rates and soaring rents – the severe drought in housing supply in much of the country over the past year accelerated price growth and kept many first-time buyers out of the market.
This was a key finding in the 2017 Profile of Home Buyers and Sellers, which was recently released by the National Association of Realtors.
The survey identified numerous current consumer and housing trends that impacted buying and selling decision, including:
• The impact of mounting student debt balances and smaller down payments;
• The rise of single female and trade-up buyers;
• The growing occurrence of buyers paying the list price or higher;
• And the fact that nearly all respondents use a real estate agent to buy or sell a home, which kept for-sale-by-owner transactions at an all-time low of 8 percent for the third straight year.
In this year’s survey, the share of sales to first-time homebuyers inched backward to 34 percent, which was the fourth lowest share since 1981. In the 36-year history of NAR’s survey, the long-term average of first-time buyer transactions was 39 percent.
“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages, which undercut their ability to become homeowners,” said Lawrence Yun, NAR chief economist. “With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home. Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”
Solid economic conditions and millennials in their prime buying years should be translating to a lot more sales to first-timers.
“But the unfortunate reality is that the nation’s homeownership rate will remain suppressed until entry-level supply conditions increase enough to improve overall affordability,” Yun said.
Other key findings included:
• Sixty-five percent of recent buyers were married couples, 18 percent were single females, seven percent were single males, and eight percent were unmarried couples.
• Thirteen percent of homebuyers purchased a multigenerational home, to take care of aging parents, for cost savings, and because of children over the age of 18 moving back home.
• Eighty-nine percent of recent home buyers identified as heterosexual, three percent as gay or lesbian, one percent as bisexual, and seven percent preferred not to answer.
• Eighteen percent of recent homebuyers were veterans and three percent were active-duty service members.
And, at 30 percent, the primary reason for purchasing a home was the desire to own a home of their own.
Marty Kovacs is the 2017 Chairman of the Santa Clarita Valley Division of the 9,800-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.