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New construction and first-time homeowners pair up big time

New homes. First time buyers. Has kind of a ring to it, doesn’t it? Both the newly-built structure and the newly-minted occupant are excited to be together, especially in these days of multiple offers and rising prices for resale homes all over the U.S. According to the February survey for the NAHB/Wells Fargo Housing Market Index (HMI), the study revealed that first-time home buyers now account for a whopping 43 percent of the new home market.

Paul Emrath reports, “Weighted by builder size (single-family homes started in 2020), about two-thirds of the builders reported that more than 20 percent of their homes were sold to first-time buyers. Twenty-seven percent even said more than half their sales were to first-timers. As noted above, the overall average was 43 percent.”

The current methodology to measure this phenomenon began in 2016 and the average first-time buyer share has trended steadily upward ever since. “Between 2018 and 2021 the share grew strongly from 32 to 43 percent,”says Emrath. “The reason for the upward trend before 2018 is less clear, but declining interest rates undoubtedly contributed to the post 2018 surge. With rates diving even lower from October 2018 to the end of 2020, the picture for this becomes even clearer.

Emrath added that for comparison, the National Association of REALTORS® (NAR) has tracked first-time buyers in the broader market that includes purchases of existing homes since the 1980s, and that “According to NAR’s latest Profile of Home Buyers and Home Sellers, first-time time buyers accounted for one-third of that broader market in 2018 and 2019, somewhat below the historic norm of 40 percent.” If this is indeed the “new normal,” pairing fresh lumber with those experiencing the American Dream for the first time, time will continue to tell.

Source: NAHB | TBWS

Construction, "First-Time Buyer", New