Sales to First-Time Home Buyers Fell 34% in 2017

Posted on November 16, 2017 by Laura Lam

first time homeowners 1981First time homebuyers continue to struggle to enter the housing market amidst limited housing inventory, falling to the fourth lowest level since 1981, according to the National Association of Realtors’ 2017 Profile of Home Buyers and Sellers report.  The share of first time homebuyers in the housing market decreased from 35% in 2016 to 34% in 2017. In the 36-year history of NAR’s report, the long-term average of first-time homebuyers rests at 39%.

“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,” stated NAR Chief Economist Lawrence Yun.  “With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home.”

While “solid economic conditions and millennials in their prime buying years” should translate to many first-time home sales, Yun said the unfortunate reality is that the homeownership rate will remain suppressed until “entry-level supply conditions increase enough to improve overall affordability.”

In addition to low inventory, student debt is also working against young potential homeowners.  While student debt has affected multiple generations, college tuition costs have become so high, that getting a job and working your way through is simply no longer possible.  In 1993, 47% of college students graduated with student debt of about $9,450 per grad, according to the Federal Reserve Board of New York. As of 2012, that number surged to 71% of college graduates, and in 2016 the average loan amount totaled a shocking $37,172 per graduate.

NAR’s study showed 41% of first time homebuyers held student debt of $29,000 in 2017, up from 40% of buyers with $26,000 in debt in 2016. While only 41% had student debt while buying their home, 55% of first-time buyers said student debt delayed saving for their home purchase.

Why the surge? As of 2014, undergraduate education cost 12 times more than it did 35 years before, far outpacing inflation. The price of college tuition and fees surged 1,122% since 1978 while the cost of medical care increased 600%, and housing and food increased 300%.  Incomes are also rising but not at a rate to counter the inflation surge.  With student loans outpacing other forms of debt, it should come as no surprise that first-time homebuyers continue to decrease lower than historical norms.

Source:  Housing Wire/NAR