A shift in the mix of home buyers has been occurring since the pandemic began. Investor numbers are shrinking, while the number of home shoppers purchasing their first home ever is on the rise. These buyers are freed from having to sell a home prior to purchasing, and they are valuing homeownership in a pandemic.
The share of first-time buyers rose to 36% in April 2020, up from 32% a year ago, the National Association of REALTORS®’’ April 2020 REALTORS® Confidence Index Survey shows.
“Home buyers are facing less competition from investors, and they are also benefiting from low mortgage rates,” notes Scholastica “Gay” Cororaton, an NAR researcher, on Economists’ Outlook blog. With fewer investors, cash sales dropped to 15% of existing-home sales in April, which is down from 20% a year prior.
Record low mortgage rates are enticing some first-time buyers. The estimated monthly mortgage payment on a home purchased at the median price of $286,800 with a 10% down payment on a 30-year fixed-rate mortgage was $1,131—which is $90 less than the median rent of $1,041 in the first quarter of 2020.
Meanwhile, as first-time buyers increase in the marketplace, investors are retreating. They may be perceiving greater financial risk associated with renters due to the COVID-19 pandemic. Also, Cororaton speculates that investors are unlikely to purchase single-family properties at the rate they did during the Great Recession, which had sparked a wave of discounted foreclosures. “In the current health and economic crisis, properties are not being foreclosed,” Cororaton notes. Also, so far, home prices are standing firm.
Source: “5 Housing Market Trends as Of April 2020,” National Association of REALTORS® Economists’ Outlook blog (May 22, 2020)