The long-term average in this survey, dating back to 1981, showed that four out of ten purchases are from first-time home buyers. In this year’s survey, the share of first-time buyers* dropped 5 percentage points from a year ago to 33%, representing the lowest share since 1987 – 30%.
Lawrence Yun, NAR chief economist, said young adults face many obstacles young adults on their path to homeownership. “Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” he said.
More competition and strict lending standards have also made it more challenging for first-time buyers. “Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums,” said Yun.
Nearly half (47%) of first-time buyers in NAR’s survey
said the mortgage application and approval process was much more or somewhat more difficult than expected. “Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years,” Yun said.
Overall, first-time home buyers have been less prevalent from the housing recovery, representing less than a third of all buyers each month for the past two years, according to the National Association of Realtors (NAR). The scarcity of the group has pushed down the U.S. homeownership rate, which dropped in the second quarter to its lowest level since 1995, according to U.S. Census Bureau data.
Despite an improving job market and low interest rates, the share of first-time home buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential, according to an annual survey released by the National Association of Realtors (NAR).