First-time buyers an "endangered species" in the us
First-time buyers could be an "endangered species" in the US, according to one new study, as home ownership continues to elude the grasp of many young house-hunters.
In the waking of the financial crisis, prices have been at historic lows, even with price increases in recent years. At the same time, mortgage rates are also low, making buying a home theoretically affordable. But City Observatory argues that they are far from a common species in the property world, thanks to a raft of headwinds against them.
Indeed, according to the National Association of Realtors, the share of house sales going to first-timers in the US is at a historic low of just 30 per cent.
One reason is the cost of rents that tenants are having to pay while they save up to climb the housing ladder. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015, with renters in the hottest markets spending half of their income on rent.
Zillow expects rental appreciation will slow down in the coming year, particularly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. Rents in San Francisco are predicted to grow by half of their speed in 2015, which still works out at 5.9 per cent.
Indeed, even with the forecast slowdown, rents will remain unaffordable in many of the major markets, notes Zillow, especially on the West Coast.
Despite that, though, it is now cheaper to buy a home than rent, with buyers able to break even on a home purchase in under two years in 70 per cent of housing markets compared to the cost of renting the same - presuming, though, that they can afford to buy in the first place.
Other economic headwinds include higher college costs, more student debt and a poor job market, which hold back the personal finances of younger buyers, while a growing number of first-time hous-hunters from groups including Latinos and African Americans face the challenge of trying to save up money without the help of a wealthy family to support them. As a result, the Urban Institute predicts that between now and 2030, most of the net increase in home ownership will be from buyers aged 65 and older.
Zillow's Stan Humphries highlights the different conditions facing young buyers of today and those in the 1970s: today's are older, have been tenants for longer and have less income. At the same time, the homes they are trying to purchase are much more expensive; house prices have risen 60 per cent since the 1970s, while average incomes have declined.