Rising Home Prices, A Mixed Blessing

evolution of median home prices

Median home prices have been steadily rising since the end of the housing crises.  In fact, median home prices are up 35% since 2009 which is representative of a very healthy and vibrant housing market.  As home prices continue their slow and steady march upward, investing in real estate has never made more sense.  But it also means that the ability to participate in the housing market is becoming more difficult for one key segment – First Time Home Buyers.

Point2Homes analyzed data from the National Association of Realtors and the US Census and found some compelling facts:

    • The share of first-time buyers has been on a downward trend – entry-level buyers represented 50% of the total sales numbers in 2010, whereas in 2018 this share dropped to 33%;
    • The price difference between a home bought by a first-timer and a home purchased by a move-up buyer is also decreasing, going from 31% in 2009 to 27% in 2018;
    • The median age of a first-time buyer increased from 30 years old in 2009 to 32 years old in 2018, but the median age of repeat buyers has really gone up: from 48 years old in 2009 to 55 in 2018;
    • The average size of a new home increased from 1,580 sq.ft. in 2008 to 1,670 sq.ft. in 2013, only to start dropping again, settling at 1,600 sq.ft. in 2018.

MEDIAN HOME PRICE CHANGES: These rapidly increasing prices put a lot of pressure on prospective homebuyers from both segments, but demand is bound to increase for more affordable homes, which are, of course, starter homes and condos. As a response to the growing demand, between 2009 and 2018, the median price of an entry-level home has risen faster than home prices in the move-up buyer segment. Currently, a first-time homebuyer needs to pay 31% more for a home, compared to a repeat buyer, who is looking at a smaller increase of 25%.

PRICE GAP: The price gap between starter homes and homes bought by repeat buyers is slowly closing. According to their analysis of NAR and US Census numbers, in 2009 there was a 31% difference between the median price of a starter home and the median price of a home from the repeat buyer segment. By 2018, that difference fell to 27%, pointing to a slow but insidious trend.

SHARE OF FIRST-TIME BUYERS: As a consequence, since 2009, when the share of first-time buyers reached 47% of total sales, and especially since 2010 when this share hit 50%, the percentage of first-timers has been in free fall. In the total number of sales, first-time buyers represented only 32% in 2015, and that share only crawled back to a meager 33% in 2018.
Source: Point2Homes