Number of First-Time Home Buyers Drops to the Lowest Level 30 Years

This tiny article, at the very bottom of page A-2 in last Friday’s Wall Street Journal, caught my eye and felt compelled to share it with my friends and clients.

According to the National Association of Realtors (NAR), the number of first-time home buyers fell to 32% of all purchasers in 2015 from 33% in 2014–the historical average for first-time buyers is about 40%. The last time first-time buyers made up such a low percentage of the overall market was in 1987.

These numbers should give us all pause about the future of the housing market–both locally and nationally.

I’ve been concerned about this issue for the last year and a half: as the housing market has steadily recovered, the long-predicted demographic shift between baby boomers and millennials has not taken hold–at least not in a way that allows for balanced, sustainable growth in the marketplace.

These numbers also clearly point to the steady increase of rental prices as a reason that potential first-time buyers delay or even forego home ownership. How can they buy a home if they cannot afford to save up for the down payment?

The reality is that, between high rent prices, high student-loan debt burdens, and the inevitable Federal Reserve interest rate hike, millennial home buyers have some serious hurdles to clear before they can even think about buying a home.

With younger buyers missing out on building equity buy buying now, it will hamper their ability to upgrade as their families grow and then sell as they move toward retirement. This is a trend that I worry about for my own kids.

According to the NAR survey, the average first-time-buyer household earned roughly $69,400, they purchased a 1,620-square-foot home costing around $170,000. The median repeat buyer purchased a 2,020-square-foot home costing $246,000.If prices continue to rise, it will only exacerbate the problem. Check out the NAR’s take on this trend in the video below.