Published by REALTOR.com | October 25, 2024
The number of homes for sale for each renter household in the U.S. remains near record lows, highlighting the supply crunch that first-time buyers face in the current housing market.
Currently, there are about 30 renter households for each available home for sale, up from less than 10 in 2006, according to Freddie Mac’s latest market outlook report.
The supply shortage dates back to the Great Recession, which dealt a major blow to new home construction. Since then, construction has slowly increased, but failed to keep pace with demand, resulting in a shortage of at least 1.5 million homes.
“Therefore, not only do people seeking to buy their first home have to navigate an expensive market, but they also have to compete with more first-time buyers as supply continues to trail demand,” Freddie Mac economists wrote in the report.
Affordability also remains a key struggle for first-time buyers. The report found that between January 2000 and July 2024, cumulative entry-level prices grew 63% more than high-end home prices, meaning that start-home prices are growing faster than the rest of the market.
“Less affordable housing is acutely felt by those seeking to buy their first homes, especially those without substantial wealth at their disposal,” the report states.
In addition to supply and affordability challenges, high mortgage rates have made the current market one of the most punishing on record for first-time buyers.
After dipping in September, the average rate for 30-year fixed mortgages has risen for four straight weeks, hitting 6.54% for the week ending on Thursday, according to Freddie Mac.
A recent survey from LendingTree found that more than half of renters fear the dream of home ownership is out of reach, with 62% saying they worry they’ll never be able to own a home.
Among renters who say they would prefer to own, cost is the biggest barrier. Of this group, 65% say the cost of a down payment is holding them back from purchasing.
As well, 52% say home prices are too high in the areas where they live, and 39% say their credit score makes it hard to qualify for a mortgage.
Despite the barriers to homeownership, the survey found that the dream of owning a home is widespread, with 83% of Americans saying they would rather own a home than rent.
