Lackluster Home Building Hurts First-Time Buyers
November 19, 2015 | Lawrence Yun, PhD., Chief Economist and Senior Vice President
Lawrence Yun for Forbes
What is going on with home builders? Housing starts refuse to rise in any meaningful way, despite the ongoing shortage in the number of homes on the market and falling rental vacancy rates. What is being built is getting quickly sold. Housing starts totaled 1.06 million on a seasonally adjusted annualized rate in October, the Commerce Department reported Wednesday, and the average time to find a buyer was 3.3 months — near record lows. The housing starts figure is the lowest in seven months and is even below the level we saw a year ago. A big negative consequence of the continuing lackluster homebuilding activity is that renters are suffering and are having a hard time converting into ownership.
According to the latest annual survey of home buyers, in the past year the first-time buyer share fell to the lowest point since 1987, nearly 30 years ago. Only 32% of recent homebuyers self-identified as being first-time homeowners compared to the historic average of around 40%. Because there are other measurements of first-time buyers, it is worth briefly noting that this stated first-time figure is out of all buyers purchasing only a primary home and therefore excludes investors and vacation home buyers. Also the government sometimes has a technical definition that does not pass the smell test for everyday common folks, such as classifying an individual as a first-time buyer even though this person was a homeowner in the past (though technically not in the past 3 years) or because someone is buying as a newly single person even though the person had been a homeowner prior to a divorce. It’s no wonder that Americans are ever more wary of Washington, when the city gets stuck in debates over technical definitions rather than applying common sense.
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