Investors vs new buyers

What do new buyers have to deal with? How about the housing inventory, affordability issues, increasing student debts, rising rents, especially in southern California and jobs that won’t allow them to save money to move out of their parents’ basements. Sounds depressing doesn’t it?

There’s one other reason why first-time buyers are finding it difficult to buy homes: Competition from investors.

MONEY Magazine points out that one in four homes sold in October were bought by investors paying cash. These investors often target the same pool of affordable starter homes as young buyers, and rather than flipping the homes right away, investors “turn around and rent these properties to those same young adults for increasing amounts every year,” according to the article.

There’s one other reason why first-time buyers are finding it difficult to buy homes: Competition from investors.

The money that the investors get from their investments makes it a lucrative endeavor to the detriment of first-time home buyers. These same investors either flip the homes or put them back on the market as rental units with inflated rents. This makes it hard for first-time buyers to save for a down payment or get out of the rental rut; additionally, it also adds to the inventory shortage plaguing many markets right now.

“Home supply is diminishing but investor demand is not going away,” NAR chief economist Lawrence Yun told the Wall Street Journal recently.

A report from NAR showed the lack of affordable inventory nationwide, showing that between December 2014 and 2015 the number of homes on the market below $100,000 fell 11%.

For more information and quick facts, check out NAR’s new first-time home buyer infographic.

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