First Time Home Buyers
The Existing Home Sales report shows a slight drop in May. It was the first drop after a three-month run up, but it is still the the second highest figure since November 2009.
An “existing home” is a resale of a home that cannot be described as new construction. The press jumped on this slight decline, calling it “unexpected” and disappointing, but a deeper look at the data shows the news isn’t as bad as it first appears.
We’re once again seeing a very normal, wide variance by region. The Northeast posted a pretty substantial loss, but the West even managed a pretty solid gain.
- Northeast : -18.3 percent
- Midwest : 0.0 percent
- South : +0.5 percent
- West : +4.9 percent
Good news for home values, we’re seeing a the supply dropping. We’re down to 8.3 months in May and, because home prices are based on supply and demand, this is a positive for pricing. By comparison, in 2008, the average existing home inventory was 10.4 months.
First time home buyers represented 46% of all buyers. Certainly the tax credit helped, but first time home buyers are a critical floor of support to the housing market.
When would-be first time home buyers are uncertain about their jobs and living in the basement at Mom and Dad’s, they don’t buy a first home. When they don’t buy that “existing home,” that “existing owner” can’t move up to the bigger home. The key to unlocking the mid-size and jumbo housing market is that first time home buyer re-entering the market. With 5.5 million existing homes being sold the past few months, we’ll have to see how this trickles up to the higher home prices.
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