First time buyers in the US still struggling financially, first survey of 2018 shows

Prospective home owners in the United States are concerned about saving for a down payment and qualifying for a mortgage with optimism about buying at its lowest for two years.

The first quarterly market experience report of 2018 from the National Association of Realtors (NAR) shows that 68% think it is a good time to buy a home, down from 72% in the final quarter of 2017.

Among renters, feelings about buying are further diminished, down from 60% to 55% and those most optimistic about buying are home owners, older people and those living in the more affordable Midwest and South regions.

According to NAR chief economist Lawrence Yun extremely challenging market conditions to start the year are chipping away at homebuyer optimism. ‘The critical shortage of listings in most markets continues to spark a hike in home prices that is not easy for many buyers, especially first time buyers, to overcome,’ he said.

‘Adding more fuel to the affordability fire is the fact that mortgage rates have shot up to a four year high in just a few months. Many house hunters are telling realtors that they are dispirited by the stiff competition for the short number of listings they can afford,’ he added.

Amidst the ongoing climb in home prices in most markets, the share of home owners who believe now is a good time to sell increased to 77% in the first quarter, up from 76% in the previous quarter, which is second only to last year’s third quarter when 80% said so, the highest overall share since the survey began in December 2015. A year ago, 69% of home owners thought it was a good time to sell.

‘There’s no question that a majority of home owners have amassed considerable equity gains since the downturn. Home prices have grown a cumulative 48% since 2011 and are up 5.9% through the first two months of this year,’ Yun pointed out.

‘Supply conditions would improve measurably, and ultimately lead to more sales, if a growing number of home owners finally decide that this spring is the time to list their home for sale,’ he explained.

Some 60% of ore households in the first quarter of this year believe the economy is improving compared to the fourth quarter of 2017 when it was 52%. Home owners from the South and those from rural areas were the most optimistic about the direction of the economy.

Stronger economic confidence this quarter also led to households having improved feelings about their financial situation. Confidence that their financial situation will be better in six months, rose from 59.1 in December to 62 in March. A year ago, the index was slightly higher at 62.6.

‘The jump in optimism to start the year can be attributed to the robust job creation in most of the country, as well as the larger pay cheques households are enjoying because of faster wage growth and the recent tax cuts. These three positives should further ignite buyer demand. However, several metro areas with the healthiest labour markets also have the most severe supply and affordability pressures. This troublesome reality is what’s dampening moods and keeping many would-be buyers at bay,’ Yun said.

When it comes to the barriers that prevents people getting on the housing ladder, the survey found that 47% put it down to limited income, 30% hampered by student loans and 28% coping with rising rents. Only 14% said that nothing was holding them back from saving for a down payment.

Non-home owners were also asked for the potential reasons why qualifying for a mortgage would be difficult. Some 45% said income uncertainty, 34% a low credit score, 29% felt they lacked the financial knowledge needed and 26% said they had too much debt.

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