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The Challenge Facing First-Time Buyers

The current supply of affordable housing inventory is not meeting the demand of first-time buyers. First American’s Potential Home Sales Model for October 2016 revealed that a lack of available housing for first-time homebuyers is preventing the market from reaching its true potential.

First American’s potential homes sales model measures a healthy market of home sales based on economic, demographic and housing market environments. The model reported that there was a 4.5-month supply decrease in September, down from 4.6 in August. The shortage has caused prices to spike at 5.3 percent since last year, according to First American.

The model reported a drop in home sales due to the decline in supply and increase in demand from homebuyers. Potential existing-home sales have increased to a 5.9 million seasonally adjusted annualized rate, which is a 97.4 percent growth from the market potential low in December 2008. The market potential for existing-home sales in October grew by 6.7 percent compared to 2015.

Mark Fleming, chief economist for First American, mentioned the decline of starter home sales, which are homes listed for under $100,000. Starter home sales dropped 10.2 percent year-over-year in October.

The unemployment rate has remained stable at 4.9 percent from September to October, and according to the U.S. Census Bureau, hourly wages have increased by 2.8 percent since 2015 up to a post-crisis high point and continuing an upward trend for incomes.

“When considering the right time to buy or sell a home, an important factor should be the market’s overall health, which is largely a function of supply and demand,” said Fleming. “Knowing how close the market is to a healthy level of activity can help consumers determine if it is a good time to buy or sell, and what might happen to the market in the future.”

Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, income and labor market conditions in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market

About Author: MirashaBrown

Mirasha Brown is a graduate of Florida A&M University and is pursuing a masters degree at Syracuse University. Born and raised in Florida, she has contributed to public relations and marketing campaigns for Rent The Runway and Billboard. She is a communications specialist with The Five Star and a contributing writer to DS News and The MReport.
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