Dive Brief:
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While owning a home remains the goal of many in the U.S., barriers including rising prices, student debt and uncertainty around down payments are holding some buyers back, according to the National Association of Realtors.
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Referencing data gathered among owners and non-owners around ownership expectations, a new report found non-owners less optimistic about purchasing a home at the end of 2016 than at the beginning, with 55% of respondents during the fourth quarter saying it was a good time to buy compared to 63% who said so in the first quarter.
- Meanwhile, the number of homeowners identifying the present as a good time to buy declined throughout the year but held at around the 80% mark. This is an important figure considering that current tight inventory conditions require owners to trade up and make their typically lower-cost properties available to new buyers.
Dive Insight:
First-time buyers, who trend younger, continue to face many obstacles to homeownership due to rising home prices and a shortage of entry-level units, while surging rents and lingering student debt have made saving for a down payment more difficult.
While these barriers are well-known, the NAR report suggests that uncertainty around how much money is required up front for purchase could be holding some buyers back. Of the non-owners surveyed, 87% said that they thought a down payment of at least 10% is required to purchase a home. However, the NAR notes, the median down payment for first-time buyers has held at 6% for the past three years.
These factors are partly behind the drop in the U.S. homeownership rate, which has held near a 51-year low this year and recorded a slight dip in the share of first time buyers from 35.2% in the third quarter to 34.7% in the fourth.
With market conditions generally improving since the recession despite recent concerns over an uptick in mortgage rates from historical lows, builders are forecasting rising demand among first-time buyers, as many renew their focus on the entry-level segment. Atlanta-based PulteGroup and Fort Worth, TX–based D.R. Horton have both recently expressed optimism over growth in the sector this year.
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