The National Association of Realtors reports first-time buyers are a shrinking share of the market, only 27 percent of buyers, compared to 40 percent in more normal market. It\u2019s not that young households don\u2019t want to buy.\u00a0 It\u2019s that desire is not matching up with their ability.\u00a0 Many young households are saddled with student loan debt while job creation and wages have been heading up only slowly.\u00a0 And the qualified mortgage rule that took effect this year to ensure lenders don\u2019t make bad loans won\u2019t help, since it tightens how much student loan and other debt loan applicants can carry.<\/p>\n
This situation is worrisome, because all of the recent growth in household formation has been among renters.\u00a0 Unless a healthy portion of today\u2019s 40 million renter households become homeowners, the housing market will continue to struggle.<\/p>\n
There are two issues to be tackled if first-time buyers are to get back to more normal levels.\u00a0 First, we must monitor the impact of the Qualified Mortgage Rule to see if lenders are being to risk averse. There is reason to think they are, because mortgage default rates have been at historic lows in the last few years.\u00a0 That suggests lenders have restricted underwriting too much.\u00a0 Second, builders need to step up home building, bringing construction levels closer to historical norms.\u00a0 More inventory helps tame price growth, and it gives buyers something they don\u2019t have much of now: selection.<\/p>\n
The housing market continues to struggle.\u00a0 In 2000, when the market was rather boring, with no bubble and no crash, there were 5.2 million existing-home sales and 1.6 million housing starts.\u00a0 Today, home sales are struggling to reach 5 million annually and new starts total only about 1 million, yet the country has 34 million more people and mortgage rates remain historically low.<\/p>\n","protected":false},"excerpt":{"rendered":"
The National Association of Realtors reports first-time buyers are a shrinking share of the market, only 27 percent of buyers, compared to 40 percent in more normal market. It\u2019s not that young households don\u2019t want to buy.\u00a0 It\u2019s that desire … Continue reading