All articles tagged with #first time homebuyers
The median age of first-time homebuyers in the US has risen to 40, reflecting a severe housing affordability crisis that delays wealth-building opportunities and alters societal trends, with policy changes needed to address the supply and accessibility issues.
The 2024 election is expected to significantly impact the housing market, with both Kamala Harris and Donald Trump proposing distinct housing policies to address affordability issues. The market currently favors older generations, with high mortgage rates and low inventory making it difficult for younger buyers. Harris's plan includes subsidies and tax credits to boost housing supply, while Trump focuses on deregulation and immigration control. These policies are crucial for young voters, who prioritize housing affordability as a key election issue.
The average age of first-time homebuyers in the U.S. has reached a record high of 38, reflecting challenges in the real estate market such as high home prices, a housing shortage, and increased competition from wealthier buyers. The share of first-time buyers has decreased to 24%, the lowest since 1981. Factors like high rent costs and debt-to-income ratios are making it difficult for younger adults to save for a home. Meanwhile, repeat buyers, often older and wealthier, dominate the market, benefiting from home equity.
The median age of first-time homebuyers has reached a record high of 38 years, highlighting the financial challenges in entering the housing market, according to the National Association of Realtors. Despite an increase in household income, the share of first-time buyers has dropped to 24%, the lowest since 1981, due to factors like high inflation, student debt, and competitive cash offers. The median age for all homebuyers also rose, with repeat buyers benefiting from larger down payments due to increased home equity.
Real estate expert Mitch Roschelle warns that first-time homebuyers will face more challenges as mortgage rates and homeownership costs continue to rise, with the average 30-year-fixed rate mortgage at 7.375% and expected to increase. Hidden homeownership costs such as insurance and property taxes are also on the rise, leading to increased rents for landlords. Roschelle describes the current housing situation as a "price spiral" and advises buyers to consider the higher costs of owning a home in the current market.
First-time homebuyers now need to earn nearly twice as much money to afford a starter home compared to pre-pandemic times, with the median income being 11% higher than what's needed. The monthly housing payment for a starter home has jumped 8.2% from a year earlier, reaching $1,896, due to elevated mortgage rates and high home prices. Redfin data shows that a typical American household earned an estimated $84,072, up 5.5% from a year earlier, but incomes are not keeping pace with the rate of starter-home costs. The pandemic has changed the definition of a starter home, with the most affordable homes being smaller and often requiring more work, making them even more costly.
Realtor.com released a report detailing the top cities for first-time homebuyers in 2024, with Irondequoit, New York, leading the list due to its affordability and job opportunities. Other cities on the list included Benton, Arkansas, Winterset, Iowa, and Newington, Connecticut. Despite high interest rates and low inventory, a recent survey showed that 95% of prospective first-time homebuyers believe they will be able to afford a home within their lifetime, with 40% expecting to do so within the next year. Additionally, Redfin reported over 775,400 active home listings across the U.S., with a 0.04% increase in the average 30-year fixed mortgage rate to 6.66%.
Realtor.com has identified the best small- to midsize towns for first-time homebuyers based on price, affordability, housing inventory, commute time, culture, and demographics. The top seven towns include Grand Rapids, Michigan; Cheektowaga, New York; Council Bluffs, Iowa; Newington, Connecticut; Winterset, Iowa; Benton, Arkansas; and Irondequoit, New York, each offering varying median home prices, home price growth forecasts, home listings, commute times, and shares of homeowners aged 25-34.
The affordability of housing in the United States has reached its lowest point since 1984, with nearly 41% of the median household's monthly income required to cover the principal and interest payments on a median-priced home. High mortgage rates and soaring home prices have made it increasingly difficult for prospective first-time homebuyers to enter the market, forcing many to rent instead. The surge in mortgage rates, driven by turmoil in the bond market and the Federal Reserve's efforts to combat inflation, has further exacerbated the situation. Despite the high borrowing costs, home prices continue to rise due to a supply shortage, benefiting existing homeowners but leaving younger Americans struggling to afford their first homes.
The National Association of Home Builders CEO, Jim Tobin, warns that first-time homebuyers are increasingly relying on financial assistance from their parents to afford a home due to high demand and limited supply. A survey by Redfin found that 38% of recent homebuyers under 30 used cash gifts or inheritance from family for down payments. Tobin believes that in the current housing market, "anything goes" to get deals done, and underwriters are more concerned with repayment ability than the source of the down payment. The CEO also highlights the need for the Federal Reserve to halt interest rate hikes and increase housing supply to address rising home prices.
Chase Bank offers the DreaMaker loan, a mortgage option that allows qualified borrowers to purchase a home with a down payment as low as 3%. While other loans like VA and USDA loans offer 0% down payment options, the DreaMaker loan provides more flexibility. The loan is available for primary residences with one to four units and requires a 30-year fixed rate term. Chase also offers educational courses for first-time homebuyers and discounts for existing customers. Other low down payment options include VA loans, USDA loans, and FHA loans.
The housing market is facing a "tricky" situation with a slowdown in home sales and an inventory crisis, according to Tracy Kasper, president of the National Association of Realtors. First-time homebuyers are struggling to compete due to higher mortgage rates, which have reached the highest level in decades, and a lack of available inventory as current homeowners are reluctant to sell. Real estate insiders are seeking ways to increase inventory, including advocating for government incentives such as tax breaks for sellers.
First-time homebuyers are being warned to avoid a costly mistake when buying a house by not researching different mortgage rates before taking on a loan. Many buyers simply accept the rate suggested by their bank or broker, but variations in borrowing costs can be found throughout the process. Research shows that getting additional rate quotes from lenders can save borrowers an average of $1,500 over the lifetime of the loan, while five additional quotes could save up to $3,000. It is important for buyers to have all the information at hand and not succumb to decision fatigue, as shopping around for the best mortgage terms can lead to significant cost savings.
Millennials, often referred to as the "unluckiest generation," are struggling to enter the housing market due to high interest rates and soaring home prices. Baby boomers, who have built up home equity and can pay in cash, now represent the largest share of home buyers, pushing many millennials to the sidelines. The median age of first-time homebuyers has climbed to 36, the oldest since records began in 1981. The uncertainty of when mortgage rates will drop and the costs associated with refinancing have made the decision to buy a home even more challenging for millennials. Despite the obstacles, millennials continue to strive for homeownership, driven by the desire to build wealth and provide a stable future for their families.
Monthly mortgage payments in the US have increased by nearly 20% compared to last year, with the median home sale price rising by 3.2%. The mismatch between supply and demand is driving up home prices, as homeowners hold onto their lower mortgage rates while prospective buyers are deterred by high rates. The average rate for a 30-year fixed-rate mortgage is currently 6.9%. Despite higher rates and lower purchase demand, home prices continue to increase due to very low unsold inventory. First-time homebuyers would need to earn close to $64,500 to afford a starter home, which is selling at a record $243,000, up over 45% from before the pandemic.