Why is the number of first-time US homebuyers at a generational low?
Young Americans are holding off on buying a home, with the average age in 2024 being a record high of 38
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A 7% interest rate doesn’t help
We bought in 2020 and have a 2.875% rate on our mortgage. We only put 10% down and had PMI but the broker was all, "you can refinance to get rid of that".
I asked him when in the world we'd ever be able to refinance at or below that rate? He had nothing to say to that.
We bought ours in 2022 at a 4.15% rate with only 5% down and since I dealt with a local lender, got a conventional loan with no PMI. Thank God. The PMI was my biggest worry, but we were very fortunate.
Also found a house for under $300k, but it was built in 1952 and we're a little in the boonies. We have a Walmart nearby and some fast food, but that's it. We both work 20 miles away in the much larger town. And then we're about an hour or so (depending on traffic) from a major city. So we had to make some concessions in order to even get a house. Though I love being in a small quiet neighborhood and being able to live away from the bustle of a larger town, but it does have drawbacks.
The biggest knock on our house is that it's a townhome but I've successfully disbanded the HOA so that's no longer an issue.
Ours is actually bigger than a lot of single family homes in the area, we're 5ish minutes from downtown St. Paul, we're on an end so only one attached neighbor, and best of all we're on a dead end sleepy little street overlooking the Mississippi.
Actually it's the view that sold us on the property.
Just FYI there are stipulations to removing PMI from a mortgage but refinancing usually isn’t one of them. Each situation is unique though. FHA and VA loans are different, etc.
You are incorrect.
As the house value increases with the market you can refinance to a new lender with greater equity eliminating the need for PMI.
I had two houses at that interest rate in the 2000’s. The wage to house price was still reasonable then. Made $40k, paid $88k for a 3/2 in middle class suburban Tampa. I’m making 30% more now but houses are 400% more.
Not on top of the wild overvaluation.
While true, I would point out that the low mortgage rates that increased housing prices --- low mortgage rates permit people to borrow more and tends to drive up prices --- in the decade-and-a-half before 2022 was unusual for the US. Prior to about 2008, interest rates were at or higher than they are today.
Here's a graph of the 30-year fixed-rate mortgage rate:
https://fred.stlouisfed.org/series/MORTGAGE30US
Here's the Case-Shiller Home Price Index. This measures same-home prices --- that it, it attempts to factor out changes in types of home being built, so new homes being larger won't drive it up.
https://fred.stlouisfed.org/series/CSUSHPISA
It's not adjusted for inflation, though.
Here's an inflation-adjusted graph:
https://www.longtermtrends.net/home-price-vs-inflation/
Between about 2011 and 2022, the real price of a given house rose rapidly in a low mortgage rate environment. In 2022, mortgage rates returned to something that's more historically-normal.
I expect that to sell a house in this environment, a homeowner will probably have to cut what they're asking.
Now combine them both and do average monthly payment.
Even with higher prices, lower interest rates mean lower monthly costs
