First-Time Buyers Burdened by Lack of Entry-Level Inventory
While Americans of all economic backgrounds are struggling to navigate an affordability crisis perpetuated by fast-rising home prices, high inflation, and elevated borrowing costs, first-time buyers are at perhaps the greatest disadvantage, Insider reports. Not only are historically high housing costs creating hurdles to homeownership for young buyers, but many are also finding a lack of affordable starter homes.
Rather than constructing entry-level homes priced below $200,000, home builders are focusing on larger, more profitable projects, while existing homeowners are holding off on listing their homes during a market correction.
As home builders attempt to make up for years of underbuilding — a situation that was exacerbated during the pandemic as high demand, labor shortages, and supply chain constraints led to even lower levels of housing supply — much of their focus has been on constructing newer and more expensive homes, which now make up a higher share of available housing inventory.
According to data from title Insurance company First American, from 2000 until the beginning of the pandemic in 2020, on average, new homes made up 11% of total housing inventory. Today, that share has climbed to 29% as existing homeowners stay put and homebuilders increase their production of new home inventory.