First-time home buyers at lowest rate since 1987

The share of homes sold to first-time buyers has fallen to its lowest rate in nearly three decades, and among the nation’s regions, is lowest in the South.

In a National Association of Realtors annual survey released Monday, 33 percent of all home sales were to first-time buyers, down 5 percentage points from last year and down 7 percentage points from historic norms dating back to 1981.

It’s the smallest share since 1987, when 30 percent of homes were bought by first-time buyers. In the South, 30 percent of homes sold in the past year went to first-time buyers. Figures for the Charlotte area were not available from the Charlotte Regional Realtor Association, said Kim Walker, the CRRA’s public relations and media relations specialist.

According to an NAR release, “Despite an improving job market and low interest rates, the share of first-time buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential.”

NAR chief economist Lawrence Yun said there are many obstacles young adults are enduring 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. “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.”

“Stronger job growth should eventually support higher wages, but nearly half (47 percent) of first-time buyers in this year’s survey (43 percent in 2013) 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.”

In addition to financial obstacles that keep would-be buyers away, more people are exhibiting a preference for renting, including millennials and empty-nesters, who are showing a preference for less maintenance, more flexibility, and higher density, walkable communities.

Other highlights from the survey, the 2014 National Association of Realtors Profile of Home Buyers and Sellers, included:

• An overwhelming majority of buyers search for homes online and then purchase their home through a real estate agent.
• The household composition of buyers responding to the survey was mostly unchanged from a year ago, with 65 percent of buyers being married couples, 16 percent single women, 9 percent single men and 8 percent unmarried couples.
• The median age of first-time buyers was 31, unchanged from the last two years, and the median income was $68,300 ($67,400 in 2013).
• The typical first-time buyer purchased a 1,570 square-foot home costing $169,000, while the typical repeat buyer was 53 years old and earned $95,000. Repeat buyers purchased a median 2,030-square foot home costing $240,000.
• The South saw the largest share of new home purchases, which made up 21 percent of all home purchases. Nationally, the average was 16 percent.
• The South saw the largest share of home purchases in suburbs or subdivisions, at 55 percent. The national average was 50 percent.
• Homes in the South were also the newest, with 22 percent of those purchased being built since 2013, while the national figure was 16 percent. The median year in which sold homes were built was 1999 in the South, and 1993 nationally.

The annual survey is part of an ongoing NAR effort to evaluate the demographics, preferences, motivations, plans and experiences of recent home buyers and sellers. Results are representative of owner-occupants and do not include investors or vacation homes.

NAR mailed a 127-question survey in July 2014 using a random sample weighted to be representative of sales on a geographic basis. A total of 6,572 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 9.4 percent. The recent home buyers had to have purchased a home between July of 2013 and June of 2014. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100 percent. All information is characteristic of the 12-month period ending in June 2014 with the exception of income data, which are for 2013.

The 2014 NAR Profile of Home Buyers and Sellers can be ordered by calling (800) 874-6500, or online at www.realtor.org/prodser.nsf/Research. The study costs $19.95 for NAR members and $249.95 for nonmembers.