Predictions for the 2015 new home market largely focus on high hopes for entry-level buyers. The problem here is that entry-level buyers, first-time buyers, and millennials are often thought of as similar or the same. While the average household age of the new home buyer is getting slightly younger, and more millennials are expected to show up in the marketplace this year, there are important distinctions between these three groups of buyers. Who will really lead market improvement in 2015?
Here are Metrostudy chief economist Brad Hunter's key points outlining how these groups are distinguished and who is really going to play a key role in new home buying this year:
The first-time buyer is not always the young buyerIt used to be that first-time home buyers were in their late twenties or early thirties. The 20-something NEW HOME buyer is not staging a major comeback.
Millennials will move to buy homes
That is not the same thing as saying that the millennials will not come back. Right now, that group, now in their late twenties, is renting, but as rents continue to move higher, an increasing number of them are buying homes. One MPC developer reports 20% of their buyers are now millennials.
The first-time buyer is not the entry-level buyer
There is now a distinction between “Entry-Level” and “First-Time” Homebuyers. Entry-level buyers in the new home market are no longer typically first-time home buyers. They have often purchased one or more resale homes, built some equity, and then stepped up to a new home from there.
The first-time buyer is not always on a strict budget
There is also a first-time home buyer group that is affluent, who used to rent in A+ locations who is now ready to buy. We are seeing that happen in many markets around the country.