Real Estate News

First-timers may need more help getting into the market

Published: 27 Oct 2017

Over the past few months, home sales numbers have been on the decline, and experts have largely blamed the lack of available properties for sale - rather than declining demand - for the slow-down. This issue may be particularly problematic for younger first-time buyers, who tend to prefer smaller, lower-priced houses, and more is now being done to help ensure young adults can get into the market and find options they can afford.

The Pending Home Sales Index from the National Association of Realtors - which tracks transactions which have not yet been completed - was unchanged between August and September, at a reading of 106, the NAR reported. This result marked the second straight month in which the index was at the lowest level observed since January 2015, and September's number was down 3.5 percent from the previous year. Moreover, the index has seen at least some decline on an annual basis in five of the past six months.

Many young people may face obstacles to buying a home in today's market.Many young people may face obstacles to buying a home in today's market.

What's the issue?
It's not that people don't want to buy homes, however, but rather that there just aren't a lot of properties for sale, the NAR noted. This is particularly true for homes with price tags of $250,000 or less, which tend to be favored by younger buyers. Indeed, first-timers made up just 29 percent of all purchasers in September, dropping to the lowest level seen in two years.

"Demand exceeds supply in most markets, which is keeping price growth high and essentially eliminating any savings buyers would realize from the decline in mortgage rates from earlier this year," said Lawrence Yun, NAR chief economist. "While most of the country, except for the South, did see minor gains in contract signings last month, activity is falling further behind last year's pace because new listings aren't keeping up with what's being sold."

That issue isn't likely to be cleared up any time soon.

Meeting in the middle?
Meanwhile, those within the housing industry understand the issue at hand and are working to address it. One such effort, according to the Sacramento Bee, involves a developer in California putting up hundreds of homes that cost just $300,000 each - a bargain in and near the Bay Area housing market - and require no down payment. The project started fewer than two years ago, has already sold 175 houses and could contain as many as 1,000 properties by the time it is completed.

However, experts also note that first-time buyers might be able to do more to become more eligible for higher-priced homes as well, according to Realtor.com. That effort should include putting in the financial legwork to boost credit ratings and build larger down payments so that younger buyers can stand out in what is likely to be a crowded bidding process.

When consumers have strong credit scores, they gain access to better mortgage rates, and with higher down payments, they reduce the principal of their home loans. These two factors can combine to significantly reduce monthly mortgage payments, potentially freeing up hundreds of dollars new homeowners can devote to other aspects of their finances.