Turns out first-time homebuyers today aren’t what they used to be
A new Zillow report shows that Americans are waiting longer to buy a home, less likely to be married, and are buying more expensive homes than they were in the 1970s.
We already know that in Boston, renters are on average spending more on rent than homeowners are on mortgages.
Svenja Gudell, chief economist at Zillow told Boston.com that you would expect, as people aged, to see a “healthy conversion from rental to for sale,’’ but in many places – Boston included – that’s not happening.
A new Zillow report shows that Americans are not only waiting longer to buy a home and less likely to be married when they do, but are also are spending more than they were in the 1970s.
Today Americans are renting for an average of six years before buying their first home, while in the 1970s, they only rented for an average of 2.6 years before making the purchase.
Nationwide, the average first-time homebuyer today is about 33 years old and their median income is $54,340. Though the income, adjusted for inflation, is similar to what the median was in the 1970s, the age is not. The median age from 1970 to 1974 was 30.6.
Also, in the 1980s, 52 percent of first-time homebuyers were married, while today that number is only 40 percent.
“We have been talking about first-time homebuyers for a while so it wasn’t super surprising that they were older, renting longer, and less likely to marry. It goes with the national trends,’’ Gudell said.
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But there was something more surprising. It turns out the price of the home-to-income ratio has risen quite a bit.
According to the report, today first-time homebuyers are buying homes that are 2.6 times their annual income. In the 1970s, they were purchasing homes that were 1.7 times their annual income.
Though the data for first-time homebuyers isn’t available for each market individually, Gudell did mention that the typical Boston homebuyer is buying a home that is 4.7 times their income. Historically in Boston that number was 3.5.
“Mortgage rates are so low right now that it doesn’t seem that high to buy an expensive home,’’ Gudell said. “You can afford more house right now for your money.’’
Why are people spending so much more on their first home?
“Part of that is driven by the fact millennials tend to move to the coasts for jobs, like Boston,’’ Gudell said. “Coastal cities are much more expensive.’’
And Gudell does not think this is something that is going to change overnight.
“We have been waiting for millennials to enter the market for a long time,’’ she said. “Relatively high rents are contributing to time needed to save for a down payment.’’
A boost in incomes would be a possible fix to allow more millennials to enter the housing market faster. But Gudell thinks this solution will be slow to materialize, meaning millennials may be stuck paying rent for a while.
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