First time Homebuyers
First-time homebuyers play a critical role in sustaining the housing ecosystem. Unlike repeat homebuyers who have more robust credit history, first-time homebuyers may not qualify for the best mortgage rates in the market. Moreover, they tend to be younger and hence have lower income and savings, which further fuels the challenge of housing affordability. In this research, we build a new methodology to evaluate the local affordability for future first-time homebuyers. Our unique approach enables us to calibrate the affordability measure by race and various income groups, through which we uncover some unexpected patterns.
First-time homebuyers play a critical role in sustaining the housing ecosystem. According to Bai, Zhu and Goodman (2015), they allow current homeowners to sell and move to a new town, a new job, a retirement community, or upgrade to a bigger house. Even during the pandemic, the share of first-time homebuyers remained strong at 31 percent according to the National Association of Realtors (NAR). As the economy slowly recovers from the pandemic, affordability for future first-time homebuyers is ambiguous. While mortgage interest rates remained historically low during the pandemic, they’re quickly climbing and other factors such as a weak labor market, higher house prices, very low inventory and student loan debt obligations, will make it challenging for future borrowers to transition into homeownership. While the fiscal stimulus aid may have mitigated the impact of the financial shock on future borrowers somewhat, it is still relatively difficult for borrowers without high credit to obtain conventional mortgages.1 Furthermore, as the nation is recovering, the speed of recovery will vary across localities, making local affordability for future first-time homebuyers even more uncertain.