How Affordable Is the Average Home for First-Time Buyers?

Finding an affordable home in major cities was already a headache, but inventory shortages and rising home prices may push more listings further out of reach for many Americans. NerdWallet reports that in 20 of the 50 largest U.S. metro areas, list prices were more than five times the median first-time homebuyer income in the first quarter 2020—for reference, experts recommend spending only up to three times a person’s income on a home purchase. Compared to repeat buyers, first time homebuyers already face the roadblocks of lower incomes and worse credit scores, which are now compounded due to the pandemic’s own economic challenges. Throw in tightening inventory and lending standards, and it does not look like it will get easier soon. 

Homes in major metropolitan areas were difficult to find and largely priced out of reach for first-time buyers in the first quarter of 2020.

In 20 of the 50 largest U.S. metros, list prices were more than five times the median first-time home buyer income in January through March. Moreover, the number of active listings dropped by 19% compared with the first quarter of 2019, placing significant obstacles in the way of new buyers as the 2020 season began.

First-time home buyers face unique challenges. They’re generally younger than repeat buyers, so they have lower incomes and potentially less robust credit history, and they may not qualify for the best mortgage rates. When these factors are compounded by high sticker prices, low supply — and then the economic impact of a global pandemic — these buyers stand to be pushed out of the market altogether.

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