The Shrinking Share of First-Time Home Buyers Affecting Future Inventory

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The number of first-time home buyers has been falling since 2011 and is currently much lower than it was in the beginning of the 2000’s. Builders expect this trend to remain and are shifting their focus away from traditional single-family homes. This can result inventory in the coming years.

At present, the share of sales to first-time home buyers is 27%. The share of sales of new homes to first-time buyers is even lower. It accounts for 16%. For comparison, the sales of new homes to first-time buyers in 2007 were 25% in 2007 and 28% in 2001.

The share of new home sales to first-time buyers has been shrinking over the past three years. The rate of decrease was particularly high between 2011 and 2013. During 2013 and the first quarter of 2014 the downward trend continued, but at a lower rate.

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In the current situation, builders expect the sales of new homes to first-time buyers to remain weak during this year and the next and possibly beyond. The major reason behind the projected weak performance is the lack of loosening of the credit standards.

Currently, the large down payments and the high credit score requirements result in fewer applications for conventional mortgages from first-time buyers. The large mortgage insurance payments have made the traditionally more accessible FHA loans unaffordable to many prospect buyers. Even though there are plans for making the credit standards more flexible, they will most likely not be implemented soon enough and quickly enough.

Builders are currently shifting towards building luxury single-family homes and multifamily units for rent. This is due to the higher demand for luxury houses coming from buyers looking to move into their second or third home and due to the higher demand for rental apartments and the ever climbing rental rates.

In the coming years, traditional single-family home construction is expected to decrease and to have a negative impact on inventory.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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