08 Feb Why First-Time Home Buyers Have Lost The Desire To Buy
First time home buyers, making up over 40% of the market just a few short years ago, now make up less than 30% in 2015. There are a number of reasons why first time home buyers are staying away, including rising home prices, high levels of debt, cultural changes that have younger Americans getting married and merging incomes later, and a general lack enthusiasm for the homebuying process.
MarketWatch recently interviewed Claire Jeffers, a 30-year-old public relations professional in Portland, Maine, loves her job, her city, and the Munjoy Hill neighborhood where she lives with her boyfriend.
She loves living within blocks of restaurants like Blue Spoon and Lolita, and her location overlooking the 100-year old Portland Observatory. But she also loves her monthly rent, which is several hundred dollars below the local median. And she knows something — perhaps another job, or graduate school — might pull her away. Those considerations, she says, mean she views buying a home as something that just doesn’t add up.
“I think it used to be a symbol of something, a long time ago,” she said. “I think that there’s a romantic notion of buying your own house and calling it your own and saying you own property. I think that’s almost antiquated at this point.”
The ‘missing link’ is first-time home buyers
A trend toward decreased participation in the housing market by first-timers has broad economic implications, experts say. For the housing market, first-timers represent fresh demand. Without them, current homeowners can’t sell homes and move up; without move-up transactions.
Only 37% of current renters said they plan to buy, while 87% of current homeowners said they planned to buy again.
The problem, analysts say, goes beyond millennials’ supposed phobias about commitment and preference for fancy amenities in fun communities.
Prices are keeping first-time buyers out of the market
There are a range of reasons younger would-be buyers might be shying away, from higher student debt burdens than earlier generations grappled with, to skepticism about real estate as a safe investment in the wake of the housing crisis.
Young people also delaying household formation until later in their lives than past generations, meaning they don’t combine incomes as early nor need space for families, according to independent housing analyst Jed Kolko.
Perhaps the biggest reason first-time buyers are staying away is price.Consumers consistently say it’s one of their biggest concerns about homeownership, and surging prices in many markets are keeping first-time buyers from being able to compete for properties.