After a long recovery from the financial crisis, it would seem that first time home buyers, who account for about 32% of people looking for a new house, are finally ready to join the real estate market.
According to Fox Business, new residential sales increased 10% from November to December of 2015. Existing home sales in January reached their highest annual rates in six months.
Data from LendingTree showed that March, April, and May are the most popular months for requesting mortgages, meaning home sales are expected to increase even more in the months to come.
The national average for mortgages from last year balanced out to around $220,499.
A survey conducted by TD Bank found that nearly 20% of first time buyers would like to purchase during this coming spring. Two-thirds of participants also plan to place a down payment of at least 20% in the same time frame.
Chris Copley, regional sales manager for TD, believes that much of this boost in sales can be attributed to Millennials coming of age to get married and forming dual income households in order to pay off student loans. This previously prevented this age group from financing home purchases.
However, as National Mortgage News reports, Millennial first time buyers may be facing another barrier as new home construction rates are slowing.
Currently, approximately 1.3 new single-family homes were built for every house that was sold. This rate has been trending downwards since 1970 when it was nearly two new homes constructed for every one sold.
“The supply from the builder perspective is just not back to normal,” said Fannie Mae Chief Economist Doug Duncan. “It’s up from last year, but it’s still below what long-term demographics would suggest, particularly in the lower price points of housing.”
This increase in demand and subsequent limit in supply, will likely lead to an increase in real estate pricing.
“The demand side is picking up and if the supply side doesn’t, you’re going to see sustained home price appreciation. That is an affordability issue,” continued Duncan.
It is still unclear exactly what is halting the supply of new homes.
However, while builders are eager to put more units on the market, concern over potential write-downs and construction labor shortages have drastically slowed down construction.