Harvard Joint Center for Housing Studies Report Shows Decline in First-Time Homebuying

The Joint Center for Housing Studies at Harvard University released The Shifting Profile of First-Time Homebuyers: 1997–2017, which shows a decline in the annual volume and rate of first-time homebuying over that time period. The authors also observe that first homes have become larger and more expensive.

The authors used data from the American Housing Survey (AHS) between 1997 and 2017 to estimate trends in the annual volume and demographics of first-time homebuyers. Because of a redesign of the AHS in 2015, the authors focused on long-term trends between 1997 and 2013 compared to 2017. First-time homebuyers purchased approximately 1.8 million homes in the U.S. in 2017, a decline from 2.13 million in 1997. While recent volume has increased from a low of 1.46 million households in 2013, purchases remain well below their pre-crisis levels. The authors attribute some of the decline in volume of purchases to “cohort” effects—Baby Boomers completed their prime homebuying years in the late 1990s, and the smaller Gen X cohort came into its prime homebuying years in the 2000s. The volume has begun to rebound since the low in 2013, which the authors attribute in part to the aging of the Millennial cohort, but they note that homebuying volume remains well below levels prior to 2007. 

The median age of first-time homebuyers declined between 1997 and 2009, from 32 to 30, before climbing to 34 in 2017. The authors did not find consistent or dramatic trends in the age distribution of first-time homebuyers in that time. Compared with all households, there was a lower share of black households and a higher share of Asian households among first-time homebuyers in 2017. Noise in the data prevented the identification of large changes in the overall racial/ethnic distribution of first-time homebuyers over time. There was a clear change in marital status among first-time homebuyers: the married shared of first-time homebuyers declined from 61% in 1997 to 46% in 2013. The share of first-time buyers that were newly formed households increased from 12% in 1997 to 26% in 2013, which the authors observe could reflect a trend of adult children living with their parents to save money prior to buying a home. 

The income distribution of first-time homebuyers has remained fairly consistent over time, in real terms, while inflation-adjusted home prices have increased. Fewer first-time buyers are purchasing homes for less than $100,000, and more are purchasing homes for more than $300,000. The share of buyers purchasing homes larger than 1,000 square feet and detached single-family homes has increased.

The Shifting Profile of First-Time Homebuyers: 1997-2017is available at: https://bit.ly/2PkEEQU