Home prices in many places have been steadily rising, buoyed by a growing economy, low interest rates and a chronic lack of inventory in some markets.
While that spells good news for homeowners – and home sellers – it is creating worry for many first-time buyers who are watching prices steadily get out of reach. That is particularly true for millennials, a sector critical to the future of the housing market.
A study out this week from national realtor Redfin shows worry about affordability is growing more predominant among home buyers, but the fear is more acute among young people.
Just over 28% of buyers said they were most worried that “prices are rising or are too high,” the largest percentage to cite this concern in more than a year, according to the Redfin survey, which was conducted in August and includes more than 1,800 home buyers. Among millennials — buyers 35 and younger — 32.5% said affordability is a big concern.
Millennials are struggling to save enough money for a home since prices are rising faster than their pay, says Selma Hepp, chief economist at Pacific Union, the largest real estate firm in the San Francisco Bay Area. Today, the typical first-time home buyer purchases a home that costs 2.6 times his or her annual income, Hepp says.
The gap between affordability and other concerns is also widening, the study finds. The second-most cited top concern was “too much competition from other buyers,” at only 13%. In previous surveys, the second- and third-most cited concerns made up a far higher percentage of total responses. Last year it was 31.4 percent, while in May it was 33.5 percent.