Builders are already aware that first-time home buyers are not active enough, which is also why most of them are focusing on building bigger and pricier homes for move-up buyers. But why so? (It looks like a good time to buy since the job market looks good and mortgage rate remains low.) Realtor.com chief economist Jonathan Smoke explains the real reason behind first-time buyers' relative absence. He writes,
"A recent report shows that these deep-pocketed investors are focusing on the most affordable segments of the market: smaller homes in both suburban and urban areas. The National Association of Realtors® released the 2016 Investment and Vacation Home Buyers Report last week, providing insight into consumer-driven home purchases. The report, which has been conducted annually since 2003, is based on a survey of U.S. consumers who purchased a residential property in 2015—whether it’s their primary residence, an investment home, or a vacation home.
Not surprisingly, investor buyers have substantially higher incomes than both median-income households and primary residence buyers: The typical buyer of an investment home in 2015 had a median household income of $95,800. So part of the secret of their success is simple: They have the cash and credit to make it happen. Investment home buyers are less likely to finance their purchase with a mortgage. Furthermore, when they do, the vast majority put down more than 20%."