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The Price of Entry for First-Time Homebuyers

According to a new Zillow analysis, homebuyers are beginning to distance themselves from other income groups, highlighting how expensive it is, especially for first-time buyers to break into the housing market.

"Home prices have outpaced incomes for nearly a decade, pushing homeownership further and further out of reach for first-time buyers even as homeownership aspirations remain very high," said Aaron Terrazas, Senior Economist at Zillow.

More than a third of homebuyers now make more than $100,000, data revealed. However, on the other hand, about 3.5 million fewer households can afford a typical home compared to 2012. This is as a result of homebuyer incomes having outpaced homeowner incomes and remain more than double that of renters.

Home values recorded an increase from 2012 to 2017, rising to 36 percent while the rise in incomes reflects a mere 11 percent. Zillow analysis shows that a typical homebuyer household in 2017 earned more than 62.7 percent of all households, up from 59.8 percent in 2012. At the same time, the share of buyer households making more than $100,000 a year grew eight percentage points to 38 percent, while those making $50,000 or less fell eight percentage points to 28 percent. The share of buyers making $50,000 to $100,000 held steady during that time at 34 percent.

New York topped the list of homebuyers making more than $100,000 in 2017 at 59 percent, followed by Los Angeles at 56 percent, and Chicago at 43 percent. The breakdown of median household incomes in the U.S. revealed that home buyers earn $79,900, while homeowner income is at $75,000. Almost half of renters, who moved in the past year (46 percent) considered buying a home during their search but ultimately ended up renting.

"In the past, low interest rates, lax lending, and migration from pricier to more affordable communities have helped square that circle – but those palliatives break down sooner or later. If becoming a homeowner trends further toward the exclusive domain of society's most fortunate, wealth inequality could see an acceleration in the years ahead," Terrazas said.

Homebuyers and homeowners, who historically had similar incomes, are seeing a widening gap as buyers pulled ahead during the recovery from the Great Recession. The analysis pointed out that to a large extent, this is because sales prices outpaced home values in many hot markets, meaning it takes more money to be a home buyer than to be a homeowner.

About Author: Donna Joseph

Donna Joseph is a Dallas-based writer who covers technology, HR best practices, and a mix of lifestyle topics. She is a seasoned PR professional with an extensive background in content creation and corporate communications. Joseph holds a B.A. in Sociology and M.A. in Mass Communication, both from the University of Bangalore, India. She is currently working on two books, both dealing with women-centric issues prevalent in oppressive as well as progressive societies. She can be reached at donna.joseph@thefivestar.com.
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