First Time Homebuyer Struggles
Being a first time homebuyer just got tougher! Bidding wars, understanding the home inspection reports, and closing costs are only a few of the issues first time homebuyers face. The percentage of first time home buyers successfully winning homes is down over 20% from approximately 50% in the market in 2010 all the way down to 27% in 2022. The question is, "Why is this percentage down so much and what can we do to address it?"
Homeownership is the most proven way to build wealth in this country. Homeowners have an average net worth that is 40x that of renters; $255,000 versus only $5,800. Plus, homeowners tend to be more involved in their community than renters which benefits the whole community more.
So why are first time homebuyers not purchasing homes? It's not through lack of trying. Actually, millennials are attempting to purchase homes in record numbers but the challenge is the market dynamics. This survey by Opendoor states 99% of millennial respondents lost out on a home they were interested in buying, it went on to add that 56% of first time homebuyers took five or more offers to win. In fact, 25% took ten or more offers.
Another issue is interest Rates. Interest rates rising from the high 2% to over 5.5%, coupled with the higher prices, have simply priced out a lot of first time homebuyers which is now pushing them back into the rental market.
The other challenge that we're running into is competing with cash offers. The average loan to value ratio is down to 55%, it was as high as 85% back in 2010. It's making it difficult for these first time homebuyers that have lower down payment options to compete with cash. While buying your first home may be more difficult now than it's ever been, IT IS WORTH IT. Buying your first home is a path to financial freedom, it also allows you to exit the challenge of rising rent costs that renters are faced with.Posted by Matt Curtis on