More of the first time home buyer are in their 20s and 30s, but why are they not pushing the market as before. Wall Street Journal published that the 2013 economy is down 10% with first time buyers. Why is this?
There could be several reason economist may mention. They can’t get credit because of tight lending standards, the credit scores are too low, or they do not have enough for down payment.
But, for the Augusta Richmond and Columbia Counties in Georgia have a different problems for first time home buyers:
The lack of solid desirable inventory in the affordable price range.
Let’s start with Augusta Richmond County. Between 2005-2009 there was an average sales price between $100,000 – $120,000. Very affordable prices for a first time homebuyer in Augusta even at a 6% interest rate. These homes were often new construction solid brick built around 1300-1500sf. Just for information, the total average home sales were around 500-700 in these price ranges every year.
Then the economic shift to Augusta’s Columbia County. Location, Location, Location. Many first time homebuyer’s desired to be in Columbia County, but at this time, the option was to settle for the smaller 1100sf two bed, two bath town/patio home. As the interest rates went down to a low of 3%, higher home prices began to become more affordable. New construction boomed with the average sales price between $130,000 -$200,000 which is now the threshold for our young first time buyers. Again, mostly new construction and built with a combination of vinyl/hardboard siding and brick or just the siding. Keeping the same square footage as the brick homes in Richmond County aforementioned in this article.
Now that the average home prices are $180,000 and above for the new construction what is the first time buyer to do? Say they want to live in Augusta Columbia County the options are older 1200-1400sf outdated floorplans in neighborhoods dominated by the investors, giving the neighborhoods a high rent to owner ratio. Sometimes as high as 85% rental.
With interest rates going back up, affordable is going back to normal, currently $110-$130. If you look at 2010-2012 in Augusta Richmond County those homes sold in the average $100,000-$120,000 were now selling between $45,000-$85,000 depending on the neighborhood. The Columbia County $150,000 home were selling in the average $100,000-$120,000. The homebuyer owner-occupant is now competing with not only local but out of town investors.
So, we have our first time home buyers ready willing and able to buy a home that is conditioned better than the apartment they currently live in and also is comparable to the new houses out of their price range in Augusta. Where is the housing inventory in the affordable first time buyer price range, when the interest rates are trying to scurry back up to 6% interest rates?