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M R EP O RT | 43 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION First-Time Homebuyers Shut Out by Affordability While the trend of low rates continue, first-time homebuyers are finding that a decline in supply and higher prices are impacting this segment of the market. T he housing market was turned upside down over the past year, as the pandemic gripped the na- tion and brought with it, a world of question marks. NerdWallet took a look at home affordability for first-time buyers in Q4 of 2020 and found that homes remained unaffordable across most of the 50 largest metropolitan areas, despite list prices falling just slightly compared to Q 3 2020. Short supply and high demand remained the trends in the market, with the lone exception being the San Francisco market. Despite record-low rates, first- time buyers typically have tighter budgets than repeat buyers, yet accounted for approximately 31% of Q 4 home sales nation- wide, according to the National Association of Realtors (NAR). A very slight seasonal Q 4 price dip led to increased affordability in some metro areas. Homes were listed at five times first-time buyer income, on average, among the 50 largest metro areas, compared with 5.2 times their income in Q 3 of 2020. Generally, a price point three times a buyer's annual income is the benchmark when shopping. According to Nerdwallet, homes became slightly more affordable for some shoppers in Q 4, as in four metro areas, homes were listed at 3.2 times median first-time buyer income— St. Louis; Pittsburgh; Cleveland; and Buffalo, New York—the most affordable metros in this analy- sis. The least affordable metro areas for first-timers included Los Angeles, where homes were listed at 12 times the median first-time buyer income; San Diego at 8.6 times the median first-time buyer income; San Jose, California at 7.7 times the median first-time buyer income; San Francisco at 7.2 times the median first-time buyer in- come; and Sacramento, California at 6.9 times the median first-time buyer income. Nationwide, homes were listed at 4.7 times the median first-time buyer income in Q 4. Winter storms played a role in Q 4 home search, as the Northeast and Texas were hit with snow, thus restricting sales and home searches. In Q 4, of the 50 metros ana- lyzed by Nerdwallet, 37 metros saw list prices either remain the same or decrease quarter over quarter. Four metros saw prices fall 10% or more from the third quarter: Buffalo, New York by 10%; Louisville, Kentucky by 12%; Cleveland by 13%; and Milwaukee by 15%. Nationwide, list prices fell just 1% from the Q 3 to Q 4 2020, and 2%, on average, across the largest metro areas. Housing inventory remained an issue nationwide throughout 2020, down 12% in Q 4 from Q 3 among the most populous metros, on average, and down 13% nation- ally. Six metro areas experienced year-over-year inventory decreases of more than 50% in the fourth quarter: Riverside, California fell 55%; Salt Lake City fell by 53%; Providence, Rhode Island slipped 52%; Baltimore fell 52%; Austin slid 52%; and Memphis, Tennessee declined by 51%. The exception to this was the San Francisco metro mar- ket—traditionally one of the most competitive markets—as the only metro where inventory increased in Q 4. However, the 6% year-over- year gain doesn't tell the entire story. San Francisco's increase can be explained by a single month, December. Compared with December 2019, listings were up 28% in 2020, an increase that impacted the quarterly average (listings were down 4% in October and up a more modest 5% in November, the other two months of the quarter).