Dive Brief:
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The share of first-time buyers mulling a property purchase ahead of the spring selling season has taken a nosedive in the wake of recent mortgage rate rises, according to a recent survey of homebuyers by Realtor.com.
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The real estate listings website said that 44% of active home buyers in January looking to purchase in the spring are first-timers, down from 55% when the survey was last conducted in October.
- In the coming year, homebuyers will also face a lingering shortage of inventory and elevated pricing, while the pickup in mortgage rates continues to fuel demand for homes and squeeze stocks further.
Dive Insight:
Economists are concerned that the upward trend in mortgage rates could intensify barriers facing first-time, price-sensitive buyers looking to buy homes. However, pent-up demand among this group has been proven and is slowly trickling onto the market.
Builders in the South and West, in particular, are striving to reach this group directly. As existing home inventory remains tight, many are turning to new single-family and townhouse construction to fill the gap.
In Texas, Houston-based LGI Homes achieved record monthly and quarterly closings in December thanks, in part, to improving conditions in the entry-level segment for first-time buyers. The company has predicted that it will close 4,700 homes this year, up from 4,163 home closings last year, if economic conditions — including interest rates — and mortgage availability continue to improve.
Toll Brothers has also said it is set to increase its focus on this group, rolling out its T | Select line in Houston this month and in other markets throughout the year. The move follows a similar one by homebuilding giant Meritage Homes, which launched its LiVE.NOW. homes line focused on the growing first-time buyer market last fall.
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