Lost Home Sales

The long and deep housing recession left many homeowners remaining in place and potential first time home buyers continuing to rent or stay with parents or friends.

In a recent article, NAHB’s Heather Taylor reported the number and distribution of first time and repeat movers in American Housing Survey odd numbered years 2001 through 2011. The AHS reports 10 million purchased in the two years prior to the 2001 survey but home buying declined to 6.8 million households who purchased a home in the two years prior to the 2011 survey. Between 2001 and 2011, the population of individuals who could have potentially purchased a home increased by almost 20 million. Absolute levels for the most recent period and the average of the oldest two periods are summarized below.

table 1

Repeat buyers and first time buyers dropped out of the market in droves. In order to normalize the trend, the table below shows the propensity to purchase by dividing the number of purchases by the population of that age group.

table 2

The only cohort that increased home buying participation was the very small group 65 years old or older buying their first home. First time home buyers increased their share of all home buying because the group did not reduce its propensity to buy as much as repeat buyers. Repeat buyers already own a home so may have been more able to work around the normally expected move while first time home buyers were less able to postpone their purchase. First time home buyers may also have been taking advantage of low house prices and low mortgage rates while repeat buyers had to be concerned with sufficient equity and trading in a recently refinanced low rate mortgage.

More recent information suggests first time home buyers are a much smaller share of the home purchases as house prices begin to rise, as repeat buyers come back into the market, as investors compete for the same homes as first time home buyers want and as lending standards make it more difficult for young households with lower incomes to qualify for a mortgage.

If the same propensities to purchase from the early the period 2000-2003 remained in place in 2011, there would have been almost 4 million more home sales over the two-year period prior to the 2011 AHS. The table below details the householders’ age where those sales would have occurred.

table 3

The missing 2 million home purchases per year are the result of first time home buyers unable to qualify for a mortgage, with insufficient cash for a down payment, with large non-housing debts, with uncertain or low-paying employment and with a more mobile future. Without incoming first time buyers, trade-up buyers have a reduced market for their existing home. Similarly, repeat buyers may not be able to qualify for a mortgage, may have insufficient or no equity and may remain concerned about future home prices and mortgage rates.

Some of the postponed home purchases will be retrieved as the barriers diminish although it is difficult to gauge what share. Even if only half do return, that is an additional 1 million home sales in pent up demand on top of the recovering demand from a normal year’s flow.



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  1. What we are seeing here are the results of government policies which have made it much harder to buy a first home since 2008. Another serious problem is the misconception that low down payment mortgage are no longer available. The national associations (NAHB, NAR and MBA) have done little or nothing to correct this misconception, choosing instead to focus on saving MID. In over 35 years of experience, I have never come across a buyer who purchased a home to take advantage of MID. I recently moved to a somewhat rural area and, while researching in preparation for the purchase, I noted that many area municipalities qualify for the USDA mortgage program that requires no down payment. The lack of information from the local professional organizations in the area on this program as well as FHA and VA speaks volumes for the misdirected focus of the industry. Everyone should bear in mind that all those changes that hurt first-time buyers were suppose to “save FHA”. That didn’t work out too well, did it?

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