Friday, December 16, 2016
By Admin

While not every real estate expert prediction comes true, one that certainly did come through in style during 2016 was the most significant return of the first time buyer for many, many years.

By August, we were able to report that, according to a Zillow survey, 53% of all buyer sales by that point in the year had been to first time buyers.

It will be really interesting when the final end of year figures are in, but what is already clear is just how fundamentally this most welcome trend has informed the real estate market throughout 2016.

Other than the simple mathematics of adding numbers to the buyer pool, first time buyers are absolutely essential to a healthy real estate market.

Without them, many would-be sellers with entry-level homes can find that it's difficult to move upscale and we can therefore quickly understand how that affects the entire home purchasing chain, either positively or negatively according to the numbers of purchasing rookies out there.

What's even better is that millennials are finally buying homes in significant numbers and it was no surprise that by the middle of the year we were reading about new home starts, a traditional first time purchase option, at multi-year highs.

There were some clear motivations behind the trend.

Perhaps the most significant of all was ultra-low mortgage rates offering a stunning home ownership opportunity for qualifying first timers. And while it's disappointing that we're ending the year with climbing rates, we shouldn't lose sight of the fact that, although they've moved from their lowest position, possibly never to return, current rates are still incredibly competitive on any historic scale.

In August, we also reported that buying a home was now cheaper per month than renting in New Mexico and 41 other states, subject to a range of common parameters. With the cost of borrowing so low, the "Do I Buy Rather Than Rent?" question was much easier for first time buyers in 2016.

Arguably above all that, however, was a vibrant jobs market and better confidence in the economy as the memories of The Great Recession years became more distant. Quite simply, young buyers felt a lot more comfortable about making what, for the vast majority of them, is the biggest financial decision of their lives.

As we head into the final half of December, thoughts are now increasingly turning to next year and if first time buyers will be there in the same or even greater numbers?

While we might see a short term reaction following the mortgage rate rises since November's election, and despite the small Fed rate hike on Wednesday, things will soon settle down again and there is likely to still be huge enthusiasm to own a home - still one of the central pillars of The American Dream.

Perhaps the bigger question, however, is will the supply of homes be able to cope with the demand? That's why, on Tuesday, we'll be taking a look at back at inventory levels in 2016 and asking where to now for the supply of homes?

 

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