Millennials may finally be ready to buy this spring, thanks to an improving job market, low mortgage rates, and record apartment rents. But the big question: Will they be able to?
This spring, first-time buyers may struggle to find a house. The number of homes in the lower-price market is severely limited. Inventory fell 8.2 percent in January from a year earlier for properties priced below $250,000, according to data from the National Association of REALTORS®.
Buyers can expect steep competition this spring. An index by Redfin that measures requests for property visits rose in the first two months of the year to its highest level since the brokerage began tracking such data in 2012.
“As soon as a house hits the market, it will be eaten by the huge demand appetite,” Nela Richardson, Redfin’s chief economist, told Bloomberg.
The share of first-time home buyers in February dropped to 30 percent in February, down from 32 percent in January but more than the 29 percent share a year ago, according to NAR.
“Affordability is a challenge this spring,” says Doug Duncan, Fannie Mae’s chief economist. Potential home buyers “would have gotten their credit in shape and they’ll have a job. But they will be frustrated because, in their market, there simply won’t be affordable homes.”
What’s more, investor sales have been trending up in recent months, which could add to first-time buyer woes. Investors tend to pay all-cash for their home purchases and compete in the same price bracket of homes.
“Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers,” says Lawrence Yun, NAR’s chief economist.
Source: “First-Time House Hunters Lose in Busy U.S. Homebuying Season,” Bloomberg News (March 16, 2016)