Three million potential homebuyers in the last decade were held back by the market’s slow recovery, The Wall Street Journal reported, citing a new report from Genworth Mortgage Insurance.
The market typically sees 1.8 million first-time buyers annually, but over the past decade, the category averaged 1.5 million per year. Factors holding back young buyers include a lack of confidence, tight credit, high student loans and rising rents that prevent saving for a down payment.
- That could soon change. First-time buyers account for 38% of the homebuying market this year, compared to the historical average of 35%. One reason for the renewed growth is that millennials are beginning to have children and thus need more space; qualifying for loans is getting easier, as well.
Millennial first-time buyers have faced the toughest uphill battle during the housing recovery. Along with financial constraints, much of the problem lies in supply. According to Trulia’s latest Inventory and Price Watch, there was an 8.7% decrease in starter-home inventory from Q1 2016 to Q1 2017 and a decline in market share from 26.1% to 25.9% during the period.
Still, signs are emerging that a surge in first-time buyers is building. A separate report by The Wall Street Journal showed that in Q1 2017 there were twice as many new-owner households (854,000) as new-renter households (365,000).
More supply may be on the way. Home sizes are down, according to the National Association of Home Builders, demonstrating that builders are refocusing from high-end to entry-level product. As evidence: townhouse construction was up in 2016, and, despite slower growth rates, continued to increase in Q1 2017.
Builders are answering the call with new homes and communities aimed at first-time buyers. Last week Gehan Homes announced Gray Point, a brand targeting entry-level buyers in Texas. Ashton Woods launched Starlight Homes in Atlanta, central Florida, Texas and Arizona earlier this year; Meritage Homes’ new LiVE.NOW. homes debuted last fall in Phoenix and Houston; and Toll Brothers introduced its entry-level T|Select line late last year, among others.