That’s giving them an advantage in situations when they are bidding against first-time buyers. What’s more, some appraisals aren’t keeping pace with the higher asking prices, making it difficult for buyers with smaller down payments to get financing, according to NAR chief economist Lawrence Yun.
Competition ‘Crazy’
“We are seeing a decent amount of first-time home buyers, and unfortunately for those people, the competition in the market for cheap houses is crazy,” said Jennifer Ames, who has worked as a real estate agent in Chicago for 19 years. She said one client wrote five contracts before winning a bid.
Returning buyers may also benefit from a greater selection of properties from which to choose. First-time buyers of existing homes are held back by “very limited inventory in the lower price ranges in most of the U.S.,” Yun said in a statement last month. A June inventory shortage of existing units was particularly acute for homes valued at less than $100,000, he said.
To be sure, the housing rebound cannot be sustained without first-time buyers, said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
“You can’t sell your house and move to a bigger one if you can’t find someone to sell your house to in the first place, and often that person is a first-time homebuyer,” said Hoffman. “First-time homebuyers are still a very important part of the market.”
Job Market
Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said the fact that first-time buyers are a smaller share of sales isn’t a major concern for now, since inventories are too low to accommodate demand as is. As the job market improves, young people who now lack the financial security to buy a home will re-enter the market, he said.
“We simply need to see the employment conditions mature,” he said, predicting that more first-time buyers will enter the market next year, and the share will increase even more the following year, helping to keep up the speed of the housing recovery. “We’re at a pace right now that can be maintained for the intermediate term, I think it’s a healthy pace.”
After finding a buyer for her former home in less than three weeks, Pattisall is now looking for a larger house in the Boston area after her husband landed a new job closer to their families.