First-time home buyers see prices slowing and inventory rising in Q3

By Elizabeth Renter | Nerdwallet

Price growth slowed and inventories edged up at the nation’s largest metros in the third quarter. And while many would-be first-time buyers have seen their economies boosted during the pandemic, those who haven’t racked up a surplus will find these modest improvements disappointing.

National averages give a good overview of what’s going on in the housing market, and in the third quarter this story is a slight improvement over the last one: prices have gone down a bit (1%) and stocks are down. grew 22% nationally, quarter over quarter. But homes were listed at 5.3 times the median income of first-time homebuyers, while three times your income is a long-held rule of thumb when it comes to affordability.

Certainly, some first-time buyers are doing well, despite the strong seller market in which we have been operating for over a year. These inaugural buyers represented 34% of all buyers from July 2020 to June 2021, up from 31% the year before, according to the 40th Annual National Association of Realtors Buyer Survey.

Some buyers have likely found higher personal savings rates, increased workplace flexibility, and very low interest rates on pandemic fodder for claiming this seller’s market. But for would-be newbies who haven’t reaped similar profits, the third quarter was another quarter of prices too high and affordable housing scarce.

Affordability on the country’s largest metros

In the country’s largest metropolitan areas, affordability remained stable in the third quarter; homes were listed at 5.5 median first-time buyer income for the second consecutive quarter. This figure is significantly higher than a year ago when homes were listed at 4.8 times the income of first-time buyers. Over the past year, prices have increased significantly, although this rate of growth has started to stabilize.

The most affordable metropolitan areas in Q3, as usual, are in the Midwest and Rust Belt areas. They include Pittsburgh, where homes are listed at 3.1 times the income of first-time buyers, Cleveland (3.3), St. Louis (3.4), Buffalo (3.6), and Baltimore and Minneapolis (3.9 ).

The least affordable metropolitan areas for first-time buyers are, again, all in California. They include Los Angeles (12.1), San Diego (9.2), San Jose (8.3), Sacramento (7.6) and Riverside (7.4).

First-time buyer support: Some mortgages can make homeownership dreams more attainable for first-time home buyers who may have less room for down payments and more fragile credit histories. But they are not a sure thing. A recent analysis shows that refusals among FHA applicants – federally guaranteed loans popular among first-time buyers – were on the rise in 2020, as lenders tighten standards to control the flow of funds amid a backdrop of strong demand. FHA applicants can lower their debt-to-income ratio and improve their credit with on-time payments to improve their chances of approval. Additionally, they can explore other first-time home buying programs – FHA loans aren’t the only option.

Prices drop very slightly

In the largest metropolitan areas, prices fell by a hair (1%) from the second to third quarters on average. This slight drop is a sign that skyrocketing price growth is slowing, although many potential buyers haven’t felt the change. Some subways, however, experienced price drops that were probably noticeable.

Prices fell double-digit from last quarter in three subways analyzed: Pittsburgh (down 12%), Cincinnati (down 10%) and Milwaukee (down 10%), and relative to the last year the declines were even greater. Prices fell double-digit, year-over-year, on 10 subways, including a 21% drop in Milwaukee.

It’s important to note that prices have been insanely high for over a year now, so even these double-digit declines only offset a small portion of the extreme increases.

Not all regions have experienced the same relief. Markets with warmer climates, such as Las Vegas; Tampa, Florida; and Austin, Texas; all experienced price increases from last quarter and around the same time last year. In fact, home prices were up another 29% year-over-year in Austin, one of the fastest growing markets in the country.

First-time buyer support: Knowing what’s going on in your local market – not the national headlines – is key to setting your expectations when you start shopping for a home. As prices have risen and supply has fallen across the country, on average, your city or neighborhood can be one of many exceptions. Or, at least, a place where these binding extremes aren’t so severe. Talk to local real estate agents about what they see in the areas you are considering. Find out specifically about homes for sale in your price range – how long they stay on the market and how many offers they receive, on average.

Inventory on the rise, in many markets

High list prices are definitely drawing home sellers into the market, and we’ve seen active listings jump 31% from the previous quarter. This is especially noticeable as we typically see home listings starting to decline in the third quarter, as the home buying season eases and the weather is cooler. However, for the second year in a row, the home buying season was anything but typical.

Some subways have seen quarterly increases large enough that hopeful buyers are noticing their options are expanding. Thirteen subways saw their stocks increase by 40% or more. Homes Available In Austin Known To Top The Lists in this analysis, increased by 73%. Hartford, Connecticut, is the only metro that saw double-digit decline; the number of active registrations there fell by 25% over the quarter.

First-time buyer support: We are still in a sharply tilted seller’s market, so buyers shouldn’t be overly bullish if they see more active listings in their area. But when there are more homes on the market, the competition eases slightly. As a first-time buyer, you still can’t expect your first offer to go through – supplies are always in short supply. However, if you can bear to be neck and neck with other buyers – moving quickly and bidding competitively – you may get a contract a little sooner than you would have last year. , or even a few months ago.

Milwaukee: Climbing the Affordable Price Rankings

If you’re shopping for a house in Milwaukee, you’re better off than most townhouse hunters. This metropolitan area has steadily become more affordable in 2021, moving from the 16th most affordable metro in the first quarter to the ninth in the third. Homes were listed at four times the median first-time buyer income in the last quarter, a time when inventories rose significantly.

List prices are down 10% from the second quarter and 21% from the third quarter of 2020, more than any other metro analyzed. While the number of active listings is roughly on par with last year around the same time – only increasing by 3% – it is up 69% from last quarter. For home shoppers, this means a noticeable increase in ads returned when they search for their favorite app, compared to what they saw in early summer.

Analysis methodology available in the original article, published on NerdWallet.

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Elizabeth Renter writes for NerdWallet. E-mail: [email protected]. Twitter: @elizabethrenter.

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