Is all the buzz about assisting first-time home buyers misguided? A report released by the Urban Institute this week indicates that the new segment that the real estate industry might need to worry about is repeat buyers, because they have yet to rejoin the market at pre-housing crisis levels. In 2001, there were about 1.8 million repeat buyers. Last year, their share dropped to 900,000, according to the report.
The foreclosure crisis decreased this group’s numbers significantly, as free-falling home prices beginning around 2007 took a large bite out of household wealth and impaired the credit-worthiness. Foreclosed home owners were left out of the mortgage market for many years, ruling many out as repeat buyers. Those who managed to hold on to their homes still have to contend with tighter lending standards, diminished equity, and perhaps a reluctance to take on the risk of buying again. This has led to an increase in home remodeling as more owners look to improve their current home than move on to another one.
“For repeat home buyers, it’s usually accumulated equity in their first home that lets them trade up into something bigger,” says Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute. “Equity is up from 2011, but not back to where it was at the peak. And credit is tight, and income hasn’t been growing.”
Meanwhile, first-time home buyers are benefiting from government programs that have offered low-down payment mortgages. In 2001, there were about 1.3 million first-time home buyers. In 2011, their share dropped to 800,000 purchases. By last year, however, their share in the housing market had recovered, returning to 1.3 million.
Source: “Your First Home May Be Your Last,” Bloomberg (Sept. 26, 2016)