Photo: Paul McCarthy/Flickr
While there were roughly the same number of US first-time homebuyers in 2015 as there were in 2001 — approximately 1.3 million — new data suggests that there has been a nearly 50 percent decrease in the number of repeat homebuyers when comparing those same years.
The number of repeat homebuyers in 2015 was just over 900,000, a huge drop from the 1.8 million recorded in 2001, according to the Urban Institute’s newly released September Chartbook.
Repeat homebuying dropped in 2007 during the housing crisis, when falling home prices made it difficult to build home equity and getting a mortgage was challenging. It has continued to decline suggesting that repeat homebuyers may be stuck in their starter homes says the economic and social policy research center Urban Institute.
The first-time homebuyers share of all Government Sponsored Enterprise (GSE) loans and Federal Housing Administration (FHA) loans dropped to 57 percent in June 2016. This was down from the 59 percent share recorded the previous month. The share of first-time homebuyers in all GSE and FHA loans has been consistently above 53 percent since the 2008 financial crisis.
GSE loans were created by Congress to improve the flow of credit into certain housing markets. Fannie Mae and Freddie Mac are the two largest GSEs. A FHA loan is insured by the government agency, and is very popular with first-time home buyers because the requirements are less strict than other conventional loans.
Meanwhile, first-time homebuyers share of FHA loans specifically declined slightly to 82.8 percent in June from the previous month’s peak of 83.3 percent. FHA loans tend to focus more on first-time homebuyers.
The average first-time homebuyer was more likely than an average repeat homebuyer to take out a smaller loan and have a lower credit score, said the Urban Institute.
Although national home prices have increased over the last four years, the Urban Institute says they are still very affordable by “historical standards.” The current median home sale price in the US is $235,875, still well below the “maximum affordability price” of $313,277. And even if interest rates rose to 6 percent, affordability would be at the long-term historical average, the data found.
The Urban Institute defines the “maximum affordability price” as the house price a family can afford putting 20 percent down, at the Freddie Mac prevailing rate for a 30-year fixed-rate mortgage with property tax and insurance at 1.75 percent of the home’s value.
However, some areas remain less affordable than others. San Francisco, San Diego and San Jose are all less affordable in 2016 than they were between 2000 and 2003, according to the Urban Institute’s data. Pittsburgh, Cleveland and Columbus however are more affordable today.
Residential properties in negative equity — which occurs when more money is owed on a home than it can be sold for — dropped to 7 percent in the second quarter of 2016. Properties that are close to negative equity made up about 2 percent share of all residential properties.
When compared to the early 2000s, serious delinquencies and foreclosures remain quite high at 3.1 percent for the second quarter of 2016. They did, however, post a year-over-year decline of 0.9 percent.
Click here to view the entire Urban Institute Chartbook for September.