October 2016 - Changing of the Guard

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46 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ORIGINATION LOCAL EDITION O R I G I NAT I O N High Rents Are Creating First-Time Homebuyers Redfin reports 45.4 percent of first-time homebuyers were driven to the housing market by rising rents. F or some time, would-be first-time homebuyers have been stuck in a catch-22. They cannot afford a down payment because they are putting so much money toward rent, while the reason they are putting so much money toward rent is they can't afford a down payment. A recent survey from Redfin gives a good indicator of which direction those would-be first-time homebuyers are leaning. A poll of 1,887 homeowners in 41 states and Washington, D.C. conducted in August indicated that 45.4 percent of first-time homebuyers were prompted to purchase a home because of the rising cost of rent. A year ago, only 24.7 percent of first-time buyers said that high rents drove them into the housing market. Just how high is the rent? Zillow's latest Rent Index indicates that rent averaged $1,408 nationwide, an increase of 2.2 percent over the year. A recent study from SmartAsset indicated that rents increased from 2015 to 2016 in 12 of the 15 major cities analyzed, and in the three cities where they declined, the drop was by less than half a percent. The cities with the highest rent appreciation from last year to this year were Seattle, Portland, San Francisco, and Sacramento, according to Zillow. Why are first-time buyers finally taking that step to purchase their first home? High rents are a motivator, but there are other factors as well, according to Alex Starace, Communications Specialist with Redfin. "[M]ortgage rates are still low, rent appears to be increasing and historically there are relatively few first-time homebuyers, so it may just be that more first-time buyers are thinking that now is the time to buy, for those reasons, and high rent is their ultimate motivating factor," Starace said. High rents were cited by first-time buyers as the top motivating reason to stop renting and buy a house; the second most popular motiva - tor was a life event, such as the birth of a child or marriage, with 23.4 percent. First-time buyers were not the only ones motivated by high rent to get into the housing market, however. Redfin's survey found that 22 percent of all buyers polled said that high rent motivated them to buy a home—compared to 12.8 percent from the same survey last August (down slightly from 24.4 percent in May's sur - vey). Life events were the most popular motiva- tor among all buyers, according to Redfin, with 26.3 percent of all buyers saying they decided to purchase a home because of a life event. Keeping Ahead of the Latest in Industry Trends:

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