Many first-time home buyers feel left out of the market due to affordability concerns as home prices have been on the rise for the last seven years. Let’s review together findings from leading providers regarding First-time Home Buyers:
National Association of Realtors
The National Association of Realtors (NAR) reports on First-Time Home Buyers (FTHB) on a monthly and yearly basis. Their latest report shows that FTHB made up 33% of buyers in March, which matches their reported share in 2018.
NAR uses survey data from their members. NAR’s results do not include every transaction completed. Rather, they only the transactions reported by members who complete the survey.
American Enterprise Institute
The other entity that reports on First-Time Home Buyers share is the American Enterprise Institute (AEI). The AEI uses data from mortgage applications. AIE define an FTHB as “any borrower who did not have a mortgage for the preceding three years.”
Therefore AEI measurement includes former homeowners. These homeowners had to transition out of a home they owned and re-entered the market after at least 3 years. The latest First-Time Home Buyers share data from AEI shows that first-time buyers made up 57.5% of all mortgages in August 2018. NAR’s data shows a 31% share for the same time period.
New research from the New York Federal Reserve shows that these traditional reports on First-Time Home Buyer share have been unable to give an accurate depiction of this group’s involvement in the market.
The NY Fed was able to take consumer data and identify when a mortgage payment entered a consumer’s credit report. Using this data, they were able to show that AEI’s reported First-Time Home Buyers share was consistently 10% higher. The NAR reports were right on par with their findings until 2010, when NAR’s share dropped to the 11% gap seen today.
So, what does this mean?
First-time home buyers have not disappeared from the market as many believe. Buying a home is very much a part of the American Dream for younger generations, just like it had been for their parents and grandparents.
This also means that rising prices have not scared buyers away from the market. Many buyers are making sacrifices to save their down payment and make their dream a reality.
If you are one of the many renters who is scrolling through listings on your phone every night dreaming of buying your own home, there are opportunities in every market to make that dream a reality!
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