The share of U.S. homes sold to first-time buyers this year
declined to its lowest level in almost three decades, raising
concerns that young people are being left out of an otherwise
strong housing-market recovery.
First-time buyers fell to 32% of all purchasers in 2015 from 33%
last year, the third straight annual decline and the lowest
percentage since 1987, according to a report released Thursday by
the National Association of Realtors, a trade group.
The historical average is 40%, according to the group, which has
been recording such data since 1981.
The housing market is on track for its strongest year for sales
since 2007, but the dearth of younger buyers could pose long-term
challenges, economists said. Without them, current owners have
difficulty trading up or selling their homes when they retire.
If home prices continue to rise sharply it will become even more
difficult for new buyers to enter the market. The median price of
previously built homes sold in September was $221,900, up 6.1% from
a year earlier, according to the NAR. The price for a newly built
home rose to $296,900 in September from $261,500 a year ago,
according to the Commerce Department.
"The short answer is they can't afford it," said Nela
Richardson, chief economist at Redfin, a real-estate brokerage.
By delaying homeownership, younger households are forgoing the
opportunity to accumulate wealth, said Ms. Richardson.
"When you wait 10 years to buy a house, you're missing out on a
pretty steady source of equity," she said. "That equity has helped
previous generations do all kinds of things, like retire."
A quarter of first-time buyers said their biggest challenge was
saving for a down payment. Of those, a majority said student loans
were the main obstacle.
Fannie Mae CEO Timothy J. Mayopoulos said on Thursday that
although lenders are loosening home-loan requirements, some are
still eschewing borrowers who would qualify under the
mortgage-finance company's guidelines but are on the riskier end of
the credit spectrum.
Mr. Mayopoulos also said a large number of first-time buyers and
other borrowers aren't applying for loans because they don't think
they would qualify, even if they are likely to get approved.
"Among millennials and people generally, folks are living more
conservatively than they did in the past. They are managing their
affairs in a very cautious way," Mr. Mayopoulos said. "What we're
experiencing is a little bit of a natural reaction to this very
difficult economic period that we went through."
Economists also said rents, which have jumped 20% over the last
five years, have made it difficult for younger households to put
money aside.
Toby Bozzuto, president and chief executive of the Bozzuto
Group, a Washington-area builder, said tenants in his buildings are
paying rents "considered commensurate with a mortgage payment" to
live near good restaurants, shorten their commutes and enjoy
amenities such as having their trash picked up right outside their
doors.
Many economists predicted 2015 would be the year when first-time
buyers would finally make a comeback, as job and income growth
accelerated, mortgage rates remained low and the memory of seeing
relatives battered by the housing bust started to fade.
"I thought we would see some pick up in the first-time buyers
given that the economy has been expanding for years," said Lawrence
Yun, NAR's chief economist. But "there are some hurdles to
overcome."
A quarter of first-time buyers used a gift from a friend or a
relative for their down payment. Those buyers tended to be slightly
more affluent and to buy bigger homes than similar buyers in
2014.
The typical first-time-buyer household earned $69,400, up from
$68,300 in last year's survey. They purchased a 1,620-square-foot
home costing $170,000. The median repeat buyer purchased a
2,020-square-foot home costing $246,000.
The NAR report is based on a survey of more than 6,400
households that purchased a home between July 2014 and June
2015.
News Corp, owner of The Wall Street Journal, also owns Move
Inc., which operates a website and mobile products for the NAR.
Joe Light contributed to this article.
Write to Laura Kusisto at laura.kusisto@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 05, 2015 13:35 ET (18:35 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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