Renters gonna rent. Actually renters are going to rent before they make their first home purchase.
At least that’s according to the February 2016 REALTORS® Confidence Index Survey Report which discovered that “Home buyers who were renting immediately prior to their recent home purchase accounted for 38 percent of sales in February 2016.”
The numbers don’t lie
Don’t think that 38 percent of sales represent any kind of significant benchmark. That’s a drop compared to 40 percent in January 2016 and 38 percent in February 2015, per NAR’s March 2016 Housing Opportunities and Market Experience (HOME) Survey of U.S. households.
What the survey reveals is that 63 percent of respondents who currently do not own a home believe it would be difficult to qualify for a mortgage given their current financial situation.
Tough times for first-timers
Additionally, relates the Economist Outlook Blog, “Steep house price increases amid modest income gains have increasingly made homes less affordable, especially for first-time homebuyers.” Access to credit remains tight compared to conditions prior to 2008, although conditions are slowly easing, using FICO scores as one indicator.
Dr. Lawrence Yun, NAR Chief Economist commented in a recent interview that “Supply and demand imbalances and unhealthy levels of price growth in several metro areas have made buying an affordable home an onerous task for far too many first-time buyers and middle-class families.”
The solution? According to Yun, it’s time for homebuilders to double their focus on constructing single-family homes.
The latest NAR survey also discovered that:
Sustained job creation and the low cost of obtaining a mortgage continue to support housing demand. However, lack of supply across many states is weighing on sales and driving up prices, making homes less affordable especially for first-time buyers.
First-time home buyers accounted for 30 percent of sales. Cash sales accounted for 25 percent of sales.
Very low supply, steep price increases, and lender processing delays were reported as the key issues affecting sales, especially to first-time home buyers.
It all adds up to trying times for first time home buyer wanna-bes.
That said, the majority of respondents in the NAR survey, specifically young renters, and those from lower income households and those living in urban areas are more optimistic about their future financial situation.