2017 has been a more promising economic year including higher wages, a lower unemployment rate and booming markets. The housing market, however, has proven to be a stumbling block for many, particularly those looking to purchase their first home. This year has brought an increase in home prices and a decrease in available homes.
Although it seemed that new buyers were beginning to take their place in the market again, that ratio has dropped to a low 34 percent of overall home sales. In years past, first time buyers have made up closer to 40 percent of the overall market, but there seems to be a correlation between rising student loan debts and falling first time homeowners.
Of those who did purchase a home for the first time in 2017, 41 percent recorded they had student debt, and half of buyers owed at least $25,000. The average amount of student loan debt increased from $26,000 in 2016 to $29,000 in 2017 as well. Many said this increase in debt has hindered their ability to save for a down payment. Conversely, the average home cost hit a new peak in August at $282,000, which means down payment costs rose as well.
Not only are fewer buyers purchasing for the first time, but it seems that those who did paid more for less house. In 2016, first time buyers averaged a 1650 square foot home for $182,500, but in 2017, first time buyers averaged a 1640 square foot home for $190,000. Across all buyers, 42 percent paid the list price or more for their home, which is the highest in survey history.
Although it is possible to have student loan debt and still be approved for a mortgage, many first time buyers are afraid to even apply, fearing a stressful, long-winded process that will result in them not being approved.
However, the Realtor’s report did mention that more buyers said the mortgage application and approval process was easier than expected, a positive note in the mix of rising debt and home prices. Unfortunately though, mortgage rates are on the rise, so first time buyers may choose to consider waiting for the new year in the hopes that rates and home prices will drop, and hopefully their down payment savings will increase.