First-time home buyers are shut out of the market like never before |  CNN Business

First-time home buyers are shut out of the market like never before | CNN Business

If you bought your first home in the last year, consider yourself one of the lucky few.

Soaring home prices and rising interest rates have pushed the share of first-time buyers to an all-time low, according to a new report from the National Association of Realtors. And these first-time buyers were the oldest ever, as the growing lack of affordability forced people to wait longer to reach life milestones like buying a home.

First-time buyers made up just 26% of all homebuyers in the year ending June 2022, down from 34% the previous year, according to NAR’s 2022 Home Buyers and Sellers Report. It was the lowest in the survey’s 41-year history. The share of first-time home buyers has hovered between 30% and 40% over the past decade and reached 50% in 2009.

The age of a first-time home buyer has also increased, with the typical age reaching 36, up from 33 last year. The age of the typical regular shopper has also climbed to 59 from 56 previously. Both are historic highs.

As home prices soared and mortgage rates rose, homebuyer income plummeted, the report said.

Median household income for first-time buyers slipped to $71,000 in the year ended June from $86,500 in the previous 12-month period. Meanwhile, repeat buyers had a median income of $96,000, down from $112,500 the previous year.

Buyers typically bought their homes for 100% of the asking price, according to the research, with 28% paying more than the asking price.

“For first-time home buyers, lack of affordability plays a key role in holding them back from homeownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “They don’t have the capital that regular buyers have for a down payment or to buy cash. They have to save while paying more for rent, as well as student debt, childcare and other expenses, and this year they’ve faced rising house prices as mortgage rates climb. also.

The period covered by the research, from July 2021 to June 2022, included some of the steepest price increases, reaching a peak median price of $413,800 last June. Inventories, hampered by decades of underconstruction, were at record highs, which kept the competition to buy a home frenzied and driving up prices. In April of this year, mortgage rates began to rise above the 5% mark. But, after the Fed embarked on a series of interest rate hikes to keep inflation under control, they soared to 7% at the end of October. On Thursday, mortgage rates fell slightly to 6.95%.

Together, these factors have created one of the toughest and least affordable housing markets in decades.

Economists and housing advocates have warned that the increasingly unaffordable housing market is preventing many potential buyers, especially buyers of color, from accessing property.

The research showed that there were fewer black and Asian home buyers in the year studied, while the share of white and Hispanic buyers increased.

In the year ending June, the overwhelming majority of shoppers, 88%, were white, up from 82% the year before. Of all home buyers, 8% were Hispanic, up from 7% previously. Meanwhile, 3% were black and 2% were Asian, both down from 6% a year ago.

This is likely to exacerbate the racial homeownership gap, in which 72% of white Americans are homeowners while only 43% of black Americans own a home, according to NAR.

“We’ve talked about impacts, but this year we’re seeing them come to fruition in data,” Lautz said. “Unless we have substantial home construction at affordable prices, we will continue to see first-time home buyers held back.”

Lautz said previous NAR research has shown potential black homebuyers have lower incomes, higher debt and less likelihood of family support for a down payment than other groups. The data also showed that black renters are also in more of a rush, with a larger share paying more than 30% of their income to their landlord.

“With rising rents and the way it’s hitting first-time home buyers, it’s impacting black buyers more than any other group,” Lautz said.

Due to the affordability crisis, homebuyers seemed less able or less interested in buying in the area where they currently live. The median distance between a buyer’s current home and their newly purchased home was typically 15 miles between 2018 and 2021. The typical distance in the year ending June 2022 was 50 miles.

Lautz said the research showed buyers faced tough decisions about getting the deal on a home they could afford.

The typical home purchased was 1,800 square feet, had three bedrooms and two bathrooms, and was built in 1986, according to the NAR report. It is a smaller and older house than in previous years.

“For a lot of people, something had to come into the equation: their location, the condition of the house, or the size of it,” Lautz said.

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