Invisible Home Buyers Impacting Housing Markets and Trends

One story not portrayed in residential real estate market reports are the growing ranks of home buyers who can’t afford to purchase a home, even if they wanted to. I predicted in mid-2004 that these invisible first-time buyers, whose presence is not reported in housing statistics could have a slowing effect on future home sales, at all levels.

The invisible buyer while out of sight, should not be out of mind. These off-the-radar housing consumers pose large implications for all in the housing market. Without first-time buyers, those that want to sell to move-up or move-on, can’t. According to a March 2007 nationwide poll conducted by Bankrate.com, affordability is the number one reason that is restraining renters from purchasing a home.

With home appreciation far out pacing growth of personal incomes, Nearly forty-percent of first-time home buyers in the Bankrate.com poll said that they simply can’t afford today’s home prices. Many would be first-time home buyers have waited on the sidelines in the boom years as prices went up, up, and up, while their annual salary increases merely kept up with inflation. Now, faced with even higher prices, they feel that owning the American dream is out of reach.

Real estate is a food chain, take one component out and it ripples through the market. Even upper-bracket home sellers aren’t immune from the basic first-time, entry level home buyer. If the first-timer can’t enter the market to buy, then the move-up buyers who want to sell and purchase a more desirable home can’t. Eventually with the move-up’s stalled in neutral, even those desiring to make the final move-up into the upper bracket home of their dreams are in a holding pattern as well.

What’s will be the result of this affordability gap? An increase in lease-to-own real estate contracts, shrinkage in the size of new homes ( as I predicted in my 2006 annual survey “What’s In, What’s Out with Homebuyers”), and an increase in multiple household ownership of single-family properties. I also see first-time home buyers relocating to markets where housing is more affordable at entry levels.

Copyright 2007 All Rights Reserved. Mark Nash

Invisible Home Buyers Impacting Housing Markets and Trends