Blog posted On July 31, 2018
As home values continue to rise, homeowners are reaping the profits. Attom Data Solutions and Bloomberg report homeowners are occupying their home for an average of 8.09 years, the longest stretch of time since 2000. Those who sold in the second quarter of 2018, recorded an average gain of $58,000, the largest profit margin in over a decade. But while homeowners are cashing in, would-be first-time home buyers have been hit hardest by this trend.
From 2017 to 2018, starter home inventory, specifically, has shrunk by 14.2%. As the market grows increasingly competitive, many would-be first-time home buyers are missing out on the wealth-building opportunity of homeownership. Owning a home, traditionally, is the first step many Americans take toward building wealth. Andrea Riquier, Realtor.com, writes, “Wealth matters in ways that earning power, jobs and wages, does not. If this path forward is cut off, it will reshape the American economy.”
In addition to the competitive market, many would-be first-time home buyers are facing other obstacles to homeownership including student debt and the residual of the effects of the Great Recession. Millennials (born between 1981 and 1997) often were unable to find stable employment after graduating college and many flocked to dense urban areas where few jobs were available. From Annie Nova, CNBC, “millennials are also renting for longer in locations that tend to be pricey, making it harder for them to save up for an eventual down payment.” Saddled with student debt and stuck working in expensive locales with sluggish wage growth, saving for a home has become increasingly challenging.
With fewer purchase options, first-time home buyers are getting creative. Fixer-uppers now account for 11.2% of starter homes, up from 10.3% in 2012. Home buyers can finance the cost of repair and remodel through a renovation loan and open their search to a larger number of properties. Using renovation financing, home buyers can convert a starter home into a home they can occupy longer, and thus build wealth longer.
Another innovative way first-time home buyers are entering the market is through HomeFundItTM the down payment crowdfunding platform. In the past, giving a home buyer a gift for their down payment required extensive documentation, including bank statements, and gifts were limited to close family, employers, or church groups. HomeFundIt makes it possible for anyone to give any amount, up to $7,500, and all gift letters are documented digitally through the online platform. Home buyers are using HomeFundIt in lieu of traditional wedding registries to collect contributions toward their first home. To learn more about HomeFundIt visit www.HomeFundIt.com.
The best way to compete in today’s market is to partner with the right lender who can find the best loan for your situation. The type of loan or down payment assistance you use when buying your home, will influence the lifetime cost of homeownership and how soon you are able to build equity.