First-time home buyers are especially struggling right now. Rapidly rising home prices and tight inventories are making it difficult for them to jump into the housing market, despite historically low mortgage rates and unemployment at its lowest point in eight years. Homes on the lower end of the price bracket are becoming less affordable compared to historical norms, The Wall Street Journal reports.
Read more: A Troubling Shortage of Homes
“That puts the most pressure on first-time home buyers,” The Wall Street Journal reports. Indeed, first-time home buyers accounted for less than a third of home purchases last year – a three-decade low, according to the National Association of REALTORS®.
In Dallas, the trend is particularly paramount, as the metro area sees one of the fastest home price rates in the U.S., up 9.2 percent year-over-year alone. Inventories of homes for sale are at a two-month supply, the lowest in more than two decades. New residents are flocking to the area as two major companies, Liberty Mutual Insurance and Toyota Motor Corp., relocate their headquarters to to the area.
Home buyer Nina Sastrodihardjo told WSJ that she was forced to take a much more aggressive approach after looking for a home in the suburb of Plano for more than two months and continuously getting outbid. From the start, she offered $6,000 over the asking price of a $285,000 home, but said the offer would expire in 24 hours.
“I knew things were competitive, but I didn’t expect it to be this competitive,” Sastrodihardjo told The Wall Street Journal. She got the house for $285,000. “You have to tackle it like a project manager.”
Affordability is becoming a more pressing issue in housing markets across the country. Nationwide, three-quarters of housing markets in counties larger than 100,000 people are less affordable now than a year ago, according to the data firm RealtyTrac. Home prices have outpaced wage growth in 94 percent of those counties since home prices reached bottom in each of the locations.
“Inventory is very restricted, which is creating bidding wars and pushing up prices,” says Daren Blomquist, a senior vice president at RealtyTrac. “That makes it a very tough environment for many buyers.”
Despite rapid equity gains, some would-be home sellers are reluctant to move because they fear they would have a tough time re-buying.
“We could sell our house in a red-hot second, but we’d have absolutely nowhere to go,” says Jane McPherson, who lives in the booming Denver area. She and her husband instead have decided to renovate their three-bedroom, one-bathroom home to try to make room for their now family of four.
Source: “Home-Price Surge Stymies First-Time Buyers,” The Wall Street Journal