High Prices Squeeze First-Time Homebuyers Out of Market

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The Balance

That’s the share of homebuyers in July who were purchasing a house for the first time, the lowest since January 2019, as entry-level homebuyers are priced out of an expensive housing market and into an increasingly pricey rental market.

First-time buyers made up 34% of the market the same time last year, but the share has been on a downward trend, according to a report released Monday by the National Association of Realtors. The same report underscored how rapidly home prices have gone up this year, with the median home sold in July going for $359,900, or 17.8% more than the same time last year.

“With median sales prices remaining close to record highs, there are prospective buyers who are priced out, and first-time buyers tend to be particularly sensitive to these elevated prices,” said Joel Kan, vice president of economic and industry forecasting for the Mortgage Bankers Association, in a commentary.

What’s more, some prospective buyers forced out of the housing market have turned to rentals for a place to live, driving up rents, said Lawrence Yun, chief economist of the National Association of Realtors, in a commentary. Indeed, the average rent in July was 9.2% higher than in July of 2020, hitting $1,843 a month, according to a report released last week by real estate company Zillow. That’s the fastest rents have grown since at least 2015, as measured by an index that combines rental asking prices on Zillow’s own listings with Census Bureau data.

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