Real Estate Outlook: First Time Buyers Size Down
The latest figures are in, and it seems that while August was still a tough time for many across the nation, existing home sales were on the rise.
The latest NAR report shows that existing home sales were up 7.6 percent during the month.
Lawrence Yun, NAR chief economist, said despite this rise, home sales still remain subpar, "The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty."
That economic uncertainty is surely being felt by consumers, who according to the Conference Board, reported a drop in confidence in September. It is now at its lowest level since February. The cause? The ailing labor market and continued negative trends in housing.
NAR President Vicki Cox Golder, said this is partly due to consumers receiving mixed signals, "People understand the good affordability conditions with stable home prices in most areas, but they’re concerned about the economy and speculation on Wall Street," she said. "We need to stick with the facts about the long-term value of homeownership and avoid unrealistic assessments. Tight credit and slow short sales are ongoing problems – expediting short sales will help the market to recover more quickly."
While the national median existing-home price for all housing types was $178,600 in August, up 0.8 percent from a year ago, sales of distressed homes rose to 34 percent, up from July, and were 3 percent over August of 2009.
These factors are affecting the way first-time buyers are buying. The National Association of Home Builders (NAHB) shows that there is a growing segment of first-timers looking for smaller and less expensive new homes. And at 8.4 millions buyers, first-timers are a large market segment.
Bob Jones, chairman of NAHB says, "Builders are increasingly gearing their homes to the needs of first-time buyers, and we expect the trend to continue in the period ahead as the economy begins generating more jobs and more people in their 20's form households. ... New homes are a better match for the needs of the population in general. Compared to what is typically available in the existing housing stock, they are more energy-efficient, easier to maintain and have designs better suited to today's lifestyles."
This demographic of first-time buyers are, on average, buying homes with 1,874 square feet, though a whopping 46 percent are buying homes smaller than $1,500 square feet. And with half of first-time buyers earning less than $60,000 a year, it has us wondering if this move could spell a new, more responsible, trend when it comes to spending?
Sales of newly built, single-family homes remained unchanged in August, but NAHB Chief Economist David Crowe reported that "while historically low interest rates and affordable prices should attract potential home buyers to the market, the slow pace of economic recovery and worries about job security are keeping many of them on the fence. Unfortunately, in the regions where we are seeing increasing demand, builders are stymied by the inability to get loans to build homes."
Published: October 4, 2010
