After slipping for three straight years, more first-time home buyers were able to break through the competitive housing market over the past year. Younger buyers under the age of 31 made up a large share of first-time buyer transactions. More single women also bought homes over the past year.
According to the 2016 edition of the National Association of Realtors' Profile of Home Buyers and Sellers, the share of sales to first-time home buyers in the 12-month period ending in June 2016 rose to 35 percent, up from the near 30-year low of 32 percent in 2015. The long-term average of first-time buyer transactions is 40 percent.
"Demand increased over the past year because of a robust job market for those with a college degree and renter fatigue at a time when homeowners continue to see their equity rise. These factors were why more first-time buyers (67 percent) said a desire to own a home of their own was the primary reason for their purchase," said Lawrence Yun, NAR chief economist.
Yun said even with the affordability challenges many buyers face, the allure of homeownership is not lost among the younger generation. Those under age 35 made up 61 percent of first-time buyer transactions.
While married couples made up the largest share of buyers (66 percent) and had the highest income ($99,200), single women made up more of the buyer share than in recent years. Single women represented 17 percent of total purchases, the highest share since 2011. Despite having a much lower income ($55,300) than single male buyers ($69,600), female buyers accounted for more than double the number of male buyers (7 percent).
"Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family. With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women," explained Yun.
The median age of first-time buyers in this year's survey was 32, up from 31 the past five years. The typical first-time buyer had a higher household income ($72,000) than last year ($69,400).
Although the increase in new homeowners is encouraging, their overall share of the market is still subpar, according to Yun. The lack of affordable new and existing inventory, home prices in many markets rising far above wages, and difficulty saving for a down payment because of rising rents and student debt are reasons why the homeownership rate for 18- to 35-year-olds is near its historical low .
"First-timers' ability to enter the market more convincingly over the next year greatly depends on supply improvements at the lower end of the market and if wages can finally awaken from their sluggish pace of growth," said Yun.
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