Bulge In First Time Buyers On The Horizon

Nearly 45 million people in the U.S. will reach the typical age for first-time home buyersin the next 10 years – 3.1 million more than the past decade, Zillow reported Tuesday, which the company said will create more demand in an already challenging market for those looking to get into their first home.
An NAHB Economics poll conducted during the first quarter of 2018 found that 17% of American adults plan to buy a home within the next 12 months.
Courtesy Adobe Stock/Monkey Business Images
The typical first-time home buyer in the U.S. is 34 years old, according to Zillow's analysis of Census data. There are 44.9 million Americans aged 24-33, or potential future first-time home buyers, compared with 41.8 million people aged 35-44, or potential past first-time home buyers, a 7.4% increase.
Zillow said that, for the past several years, the housing market has been characterized by shrinking inventory and higher prices, particularly in the least expensive third of homes, those most likely to be targeted by first-time home buyers. These starter homes have gained 57.3% in value over the past five years, a median increase of $47,600, while for-sale inventory in this price range has fallen by 23.2%. Over the same time period, the most expensive third of homes gained 26% in value and homes in the middle third appreciated 36.8%.
This, Zillow said, portends a return to a housing market with falling inventory and rising prices, at least at the lower end.
The growth in potential future first-time home buyers is more extreme in some markets, including San Diego and Boston, already among the 10 least affordable large housing markets. Both metros will see a nearly 20% increase in the next wave of potential first-time home buyers compared to the previous wave.
First-time buyers are facing difficulties saving for a down payment – a recent Zillow analysis found that buyers need 1.5 years longer to save for a down payment than they did 30 years ago – and securing a loan. Nearly four times as many first-time buyers who obtained a mortgage last year were denied at least once (29%) compared to repeat buyers (8%)ii.
Some markets provide better conditions for first-time buyers with a combination of lower home values, strong appreciation forecasts, available supply and a high share of listings with a price cut. The three best markets for first-time home buyers in the 2019 home shopping season are Tampa, Las Vegas and Phoenix

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