High rents, high debt and increased competition are three things buyers overcame to purchase their first homes this year, according to a National Association of Realtors executive.
The NAR released its 2015 Profile of Home Buyers and Sellers on Nov. 5, which reported the percentage of mortgage originations that went to first-time buyers fell for the third straight year in a row to its second lowest level in history.
“We know rents have been steadily rising in many markets and this has a direct impact on the abilities of many renters to save for a new home purchase,” NAR Director of Survey Research and Communications Jessica Lautz said. “Seventy-seven percent of first buyers were renting before they bought. That tells us they weren’t just moving out from their parents’ basements.”
In addition, she said debt levels, including particularly high student loan debt levels, made it difficult to save for a home. Citing the survey, Lautz observed 25% of new buyer respondents reported overcoming debt to save for a new home and 58% of those reported student loan debt had been a challenge.
“It’s important to remember that with an average student loan debt load of $25,000, there will be a number of people with a higher load than that, and this can make it very hard to save a down payment,” she said.
Finally, she pointed to a shrinking number of available homes in first-time buyers’ price ranges for keeping them out of the market.
“Unlike previous housing recoveries, investors buying homes to rent or flip for higher prices have been a large factor in many of these markets,” Lautz added. “Not only do the investors have deeper pockets than first-time buyers, they compete for many of the same homes first-time buyers might buy – and they have cash.”
By David Morrison