The Quantifiable Inconsistency: Evaluating Our Perceived Researched Value of First-Time Homebuyers In The Market

Rethinking the Value of First-Time Homebuyers in the Market

Housing market analysts have reached the conclusion that first-time homebuyers are not able to keep up with the incline of home prices, which has been consistently rising over the last seven years.

The National Association of Realtors (NAR) latest reports on existing home-sales can be found here. Their reports on the monthly and yearly activity of First Time Homebuyers (FTHB) shows us little change from March of 2019 to March of 2018. The NAR finds that 33% of buyers are made up of by FTHB.

The NAR uses survey data from their members to come up with this statistic, so rather than analyze every individual transaction completed, the information is a report of all the members who opted in to complete the survey.

In comparison to this method, we can take a look at a separate organization that gets their information from mortgage applications. This organization is the American Enterprise Institute (AEI). The AEI FTHB statistics are determined from those applications that define an FTHB as “any borrower who did not have a mortgage for the preceding three years. “This means that there is an inclusion of former homeowners who transitioned out of a home they previously owned and re-entered the market after at least 3 years.

To see how each method affects the statistics, we can compare August of 2018 for both organizations. We learn that FTHB data from AEI shows a share of 57.5% of all mortgages, where NAR shows a share of only 31% for the same time period. However, research from the New York Federal Reserve shows that these reports, and others like them, on FTHB share have been unable to give an accurate depiction of this group’s involvement in the market.

The NY Fed has shown that there has been a consistent 10% discrepancy in the FTHB findings of AEI reports in comparison to NAR reports. The NY Fed was able to identify when a mortgage payment entered a consumer’s credit report to determine when a first-time home purchase was made. With NAR on the lower end of the share perception of FTHB, they have maintained this 10% rate until 2010, when the gap increased to 11%.

In conclusion…..

First-time home buyers have not disappeared from the market as many analysts had believed. Buying a home is just as important for the younger generations as it had been for their parents and grandparents.

It’s important that we evaluate the different methods in which organizations gain their data so that we can use our own discernment when placing value on this group in the market. The rising prices have not scared the buyers away from the market.

In fact, many FTHB are making necessary sacrifices to save their down payment to make sure they get their dream home. If you are looking to purchase your own home, know that there are opportunities in every market for you to do so!