- June is National Homeownership Month!
- Now is a great time to reflect on the many benefits of homeownership that go way beyond the financial.
- What reasons do you have to own your own home?
Home prices have been on the rise for the last seven years, leading many housing market analysts to conclude that first-time homebuyers are being shut out of the market due to affordability concerns.
The National Association of Realtors (NAR) reports on the percentage of First-Time Home Buyers (FTHB) on a monthly and yearly basis. Their latest report shows that FTHB’s made up 33% of buyers in March, which matches their reported share in 2018.
NAR uses survey data from their members to come up with this statistic, so their results do not include every transaction completed. Rather, they only the transactions reported by members who complete the survey.
The other entity that reports on FTHB share is the American Enterprise Institute (AEI). The AEI uses data from mortgage applications that define an FTHB as “any borrower who did not have a mortgage for the preceding three years.”
This means the AEI measurement also includes former homeowners who transitioned out of a home they previously owned and re-entered the market after at least 3 years. The latest FTHB share data from AEI shows that first-time buyers made up 57.5% of all mortgages in August 2018. NAR’s data shows a 31% share for the same time period.
New research from the New York Federal Reserve shows that these traditional reports on FTHB share have been unable to give an accurate depiction of this group’s involvement in the market.
The NY Fed was able to take consumer credit data and identify when a mortgage payment entered a consumer’s credit report to determine when a first-time home purchase was made. Using this data, they were able to show that AEI’s reported FTHB share was consistently 10% higher. The NAR reports were right on par with their findings until 2010, when NAR’s share dropped to the 11% gap seen today.
First-time home buyers have not disappeared from the market as many analysts had believed. Buying a home is very much a part of the American Dream for younger generations, just like it had been for their parents and grandparents.
This also means that rising prices have not scared buyers away from the market. Many first-time buyers are making sacrifices to save their down payment and make their dream a reality.
If you are one of the many renters who is scrolling through listings on your phone every night dreaming of buying your own home, there are opportunities in every market to make that dream a reality!
In a recent Insights Blog, CoreLogic reported that rent prices have skyrocketed since 2005. Meanwhile, the typical mortgage payment has actually decreased.
“CoreLogic’s national rent index was up 36% in December 2018 compared with December 2005, while the typical mortgage payment was down 4% over that period.”
It makes sense that rents have risen. However, how did mortgage payments decrease? CoreLogic explained:
“It’s mainly because mortgage rates back in December 2005 were significantly higher, averaging 6.3% for a fixed-rate 30-year loan, compared with 4.6% in December 2018.
The national median sale price in December 2005 – $190,000 – was lower than the $220,305 median in December 2018, but because of higher mortgage rates in 2005 the typical monthly mortgage payment was slightly higher back then – $941 – compared with $904 in December 2018.”
Additionally, a recent report by the National Association of Realtors (NAR) showed that purchasing a home requires less of your monthly paycheck.
According to the Economists’ Outlook Blog, NAR’s February 2019 Housing Affordability Index showed that the “percentage of income needed” to pay the typical mortgage has decreased the last three months.
What does this all mean to the current housing market? We think First American said it best in a post last week:
“The mortgage rate-driven affordability surge has arrived just in time… Rising affordability has already benefited home buyers and, if the lower rate environment persists, we’re in for a great spring home-buying season.”
There has been a lot written about millennials and their preference to live in city centers above their favorite pizza place. Some have even gone so far as to say that millennials are a “Renter-Generation”.
And while this might be true for some millennials, more and more research has surfaced that shows for the vast majority, owning a home is a major part of their American Dream!
New research shows that 66% of millennials who currently rent are determined to buy a home! Seventy-three percent of those surveyed by Pulsenomics plan to buy a home in the next five years, with 40% planning to do so within the next two years!
“Millennials want to own a home as much as prior generations,” Ali Wolf, Director of Economic Research at Meyers Research says. “We saw millennial shoppers scooping up homes in 2018—and 2019 will be no different.”
Are you one of the millions of renters who are ready and willing to buy a home? Let’s get together to determine your ability to buy now!