The pace of existing homes sales increased just more than 5 percent from the month before, according to the National Association of Realtors, but perhaps more interesting is who it thinks is doing the buying: almost a third of buyers in May were first-timers. That’s moving closer to the 40 percent that the organization sees as normal for the housing market.
Ben Fein-Smolinski and his girlfriend, both 26, were among those first-timers who leaped into the housing market in May.
“We figured that it was maybe time to stop paying rent and to get a place more permanent,” he says.
Buyers like Fein-Smolinski are an important piece of the housing economy. They tend to buy smaller homes, perhaps from people who might have decided they need more space for the kids. That family might then buy a home from baby boomers looking to downsize.
But Fein-Smolinski’s decision was also an economic one.
“We also thought it would be a little more cost effective, instead of finding a bigger apartment to rent,” he adds.
“Rents in this country have never been less affordable than they are now,” says Stan Humphries, chief economist at Zillow. “If you can scrape together the down payment and qualify for a mortgage, it makes home ownership look very attractive.”
Other driving factors may be the improving job market or, perhaps, people who want to lock in low interest rates.
However, Richard Green, a professor at the University of Southern California, cautions not to get too excited about one month of data. Housing supply is tight and he says an even more important metric to watch is new construction.
“When you see a pick-up in existing home sales, that indicates there’s more demand for housing, and that extra demand for housing could boost the demand for new construction,” he says. “Things are better than they were three years ago, but we’re still not close to being normal.”
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