Soaring home prices and the shortage of properties on the market are taking a toll on buyers, particularly first-time buyers.
The share of first-time homeowners fell to just 29% of all existing home buyers in January, according to the most recent National Association of Realtors® report. That’s down from 32% in December and 33% in January 2017.
“First-time buyers are typically people with a tighter budget,” says realtor.com® Senior Economist Joseph Kirchner, who worries this could further depress homeownership rates down the line. “They’re looking for homes on the more affordable end of the market, but that is where the lack of homes is most severe.”
Nationally, the dearth of inventory also drove down the number of existing homes sold, 5.38 million overall, in January. (Existing homes have previously been lived in.) Monthly sales dropped 3.2%, while annual sales decreased 4.8%.
“There’s plenty of demand, but people just cannot find a home on the market that meets their needs and they can afford,” Kirchner says. “It’s not a good start for the spring market. The shortage will continue.”
Across the country, there were 15.5% fewer existing homes in January selling for $250,000 or less compared with a year ago. Meanwhile, there were 25% more selling for $500,000 or more.
In January, sales of single-family homes, which are often the most sought-after properties, hit 4.76 million. That’s a 3.8% fall from December and 4.8% from the same month a year earlier.
Condos and co-ops fared a bit better, as they’re generally priced a little lower than single-family homes, with the number of monthly sales rising 1.6% in January to hit about 620,000. But that’s down 4.6% from January 2017.
The median existing home price was $240,500 in January. That was a 2.4% drop from December but represented a 5.8% jump from January of the previous year. However, the cost was still substantially less than the median price of a newly constructed abode.
New homes cost a median $335,400 in December, according to the most recent joint report by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. That’s nearly 39.5% more than an existing home.
Around the country, higher prices and the lack of inventory took its toll. In January, the South had the most existing home sales, at about 2.26 million. However, that was still down 1.3% from December and was a 1.7% drop from January 2017.
The Midwest had the second most home sales, at 1.25 million, in January. That was down 6% from December and 3.8% lower than the same month last year.
There were 1.14 million existing homes sold in the West. That was a 5% drop from the previous month and a 9.5% fall from the previous year.
The Northeast had the fewest existing home sales, at just 730,000. That was also down, both by 1.4% month-over-month and 7.6% year-over-year.
Meanwhile, prices of existing homes were up in every region. They were the most expensive in the West, at a median $362,600 in January. That was a 8.8% jump over January 2017.
In the Northeast, median prices hit $269,100, up 6.8% annually. In the South, they were $208,200, up 4.3%, and in the Midwest, they were $188,000, up 8.7%.
“It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth,” NAR Chief Economist Lawrence Yun said in a statement.