Why Housing Is Dead: First-Time Buyers Collapse To 27-Year Lows

Tyler Durden's picture

The Millennials (one of the biggest generations in US history) are just not getting with the status quo program. As we detailed previously, with lower credit scores, less disposable income, and a soaring number of people living with their parents; so it should be no surprise that The National Association of Realtors (NAR) today admitted that first-time homebuyers plunged to the lowest level in 27 years. The blame - of course - rather than low/no-growth fiscal policies, student debt servitude, and inequality-driving cheap-funding monetary policy, is price competition from 'investors' and too "stringent credit standards," perfectly mirroring FHFA's Mel Watt's Einsteinian insanity desire to dramatically ease lending standards and slash minimum down-payments (as we noted previously). Perhaps NAR accidentally stumbles on the biggest reason no one is buying in their profiling: the typical first-time buyer was 31-years-old, while the typical repeat buyer was 53 - smack in the middle of the Millennial collapse.



Here is the size of the Millennial generation in context:


With less disposable income, and thus fewer assets, today's youth is finding it ever more difficult to build up a solid credit history...


... and another logical outcome: fewer can afford to buy homes and start familiies, instead chosing to live in their parents' basement...


Read more about The Millennials here...

*  *  *

Which is exactly what is happening (as NAR reports,)

Despite an improving job market and low interest rates, the share of first-time buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential, according to an annual survey released today by the National Association of Realtors®.



The long-term average in this survey, dating back to 1981, shows that four out of 10 purchases are from first-time home buyers. In this year’s survey, the share of first-time buyers* dropped 5 percentage points from a year ago to 33 percent, representing the lowest share since 1987 (30 percent).

Who is to blame?...

Lawrence Yun, NAR chief economist, says there are many obstacles young adults are enduring on their path to homeownership. “Rising rents and repaying student loan debt makes saving for a downpayment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” he said.


“Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums.”


Yun adds, “Stronger job growth should eventually support higher wages, but nearly half (47 percent) of first-time buyers in this year’s survey (43 percent in 2013) said the mortgage application and approval process was much more or somewhat more difficult than expected. Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years.” 

*  *  *

But don't worry as FHFA's Mel Watt is on the case to fix this... it should be every young person's right to buy a home, no matter how low their income or how little they have saved (as Mike Krieger explained):

Well, Bloomberg reports that:

A U.S. housing regulator plans new steps to encourage banks to lend to buyers with less than-perfect credit scores, according to two people with direct knowledge of the matter.

Watt will also discuss an effort that would allow borrowers to put down as little as 3 percent of the purchase price on loans backed by Fannie Mae and Freddie Mac, the people said.


Fannie Mae and Freddie Mac (FMCC), which have been under U.S. conservatorship since 2008, buy mortgages and package them into bonds on which they guarantee payments of principal and interest. Watt’s announcement is part of an effort to encourage banks to ease credit and follows a series of steps he first described in May.

It’s for the good of the people right? He’s a “liberal” so he’s always working for the little guy, right? Wrong.

The best characterization of Mr. Watt I’ve seen comes from realestate.com, here it is:

While some observers consider Watt’s appointment a significant lurch to the left compared to DeMarco, (he was among those named by the Democratic Socialists of America as a member of their caucus in 2009), Watt himself has raised a tremendous amount of money from banking and real estate-related corporations and trade associations. One report from the Sunlight Foundation found that for 2009, Watt had received some 45 percent of his total campaign funds from donors in the finance and real estate sector.

This is what all these phony “liberals” do. They pretend to be champions of the poor so that they can fool their clueless constituents and thus serve the oligarchy that much more effectively. This housing plan isn’t about helping families afford homes, it’s about creating artificial demand for overpriced homes so that stuck private equity and hedge fund mangers (who can no longer make it rain in the buy-to-rent trade) have some peasants to sell to ahead of the next crash.

Rule Number 1 of Oligarch Club: Always make sure you sell to the muppets before the music stops. Here we go again.

*  *  *

Certainly does not look like "The Recovery..." it was penned to be...


The long-term...


The transmission channel is officially broken... so don't ask for more Fed action!


*  *  *

Leaving Rudy Havenstein to sum it all up perfectly!!

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nope-1004's picture

Who needs a house when you can shack up with mom and dad?  As the boomers leave their homes and enter retirement villas, the two-storey inventory glut will hit with a bang.  This is just the beginning.  Housing is done.

Never should have been twisted into an "investment" in the first place by the money lenders and MSM constantly pushing the "flip this house" TV illusion.


rccalhoun's picture

off the subject:   anyone use bullion direct?   what dealer do you use? 

thank you in advance

hedgeless_horseman's picture



House?  Land?  We need Americans to fill up all of the new Multi-Family Debt-Service Camps.


boogerbently's picture

The out of work "millenials" must not know that unemployment is only 6%.

new game's picture

japan merica style. huff and puff dat colony of flim flam piece of shit called clusterfuck housing...

Ying-Yang's picture

"lurch to the left"

Lurch to the left then lurch to the right...

You do the hokey pokey
and you turn yourself around
that's what it's all about.

Left-Right arguments are bullshit.

Manthong's picture

Yeah, but can the kid’s afford the Radon remediation for mom and dad’s basement?

max2205's picture

'Improving job markets '. Wtf!

Time to print houses for the FSA

Manthong's picture

Maybe the Fed should replace some of the Heidelbergs with these things..


The9thDoctor's picture

From the article:

This housing plan isn’t about helping families afford homes, it’s about creating artificial demand for overpriced homes so that stuck private equity and hedge fund mangers ... have some peasants to sell to ahead of the next crash.

The bold emphasis is mine.  To me that is the big huge elephant in the room.  Houses are WAY WAY WAY overpriced.  Yeah credit is stringent, student loans are due, credit cards are due, 0-care insurance is due, food went up from a decade ago, but all of that wouldn't be such a big deal if houses were priced at 1990s levels.

A mid-century out-of-style, out-of-date, box that was worth $70,000 in the late 1990s, shouldn't be worth $199,000 today (despite being a decade and a half older mind you) just because a flipper put in a new sink faucet and a paint job.

Despite being conned seven ways to Sunday, at least Millenials realize at least THAT is a scam, and that is why living at mom's house that she bought in 1984 and paid off is better deal for them.  Even renting an apartment is better, because at least the landlord has a full-time maintenance crew, whereas the upkeep for the said mid-century box will cost lots of time and money that they don't have.

If interest rates go up, mortgage companies might as well just declare Chapter 11 and throw in the towel.  If June 2013's increase to 5% caused massive layoffs at mortgage companies because their phones went dead silent for a whole 8 hour shift, it will be much, much worse.

Until housing has a major correction, these charts will look worse and worse by the month.

Cathartes Aura's picture

good perspective there, 9thDoctor,

particularly when one factors in the "millennials" aren't needing huge old boxes to live in, as many haven't bought into the "nuclear family" meme, and are instead either building some type of "tiny house" or "mobile living" arrangement for chasing "jobs".

and then there is the downsizing "boomer" with huge old houses invested in and empty rooms to heat/maintain.

the future of housing is shifting with demographics/wage availability - most of the younger folks I know aren't interested in being tied to a debt-box in the same fashion as past generations were.  most of them want flexibility to explore whatever options interest them, and various types of "community" models are being created all around us - healthy!

Handful of Dust's picture

9th doctor is correct; my old house is still up over 300% when salaries in that area have not risen more then 10% over the last 10 years. In fact, many companies and small businesses there (including my former company there) actually CUT salaries 10% and eliminated many benefits.


Oh yeah, property taxes there have skyrocketed b/c of new or expanded schools and the tax base on these overpriced boxes.

localsavage's picture

It blows my mind how many otherwise smart people don't understand the basic math realities that will crush housing in the long run. 

mkkby's picture

You are wrong, doctor.  Around my town, millenials with jobs are paying $600k for 50 year old crap boxes on tiny plots, where you can hear your neighbor's toilet flush.

They've learned nothing.  Most have nothing to spend beyond the must have apple product.  Those that do have income waste it just like every other clueless TV brainwashed generation.

daveO's picture

Healthy alright. The healthy avoidance of debt penury that created all those McMansions.

zuuma's picture


They still have to pay off the hefty loans

from taking important courses at elite universities:


yrad's picture

So, FHFA want to lower the down payment on an FHA mortgage from 3.5% to 3.0% and save the day? I dont see that happening...

kliguy38's picture

high density killing fields

max2205's picture

Return to Pullman days where you worked for him and he gave you a house to live in.......for most of your wages... What a deal

daveO's picture

BB days. Before Banksters.

KnuckleDragger-X's picture

Everybody is broke and they shagged most of the sheep last time around so nobody wants to play. The banks are leveraged out the ass and are holding a lot of property off books so they won't show their true losses but it can't last forever. I expect the next round of FED burning money will be them buying up land in some kind of REIT type scam. This won't end well.

venturen's picture

Maybe we should force Fannie to loan to people that can't afford it....I heard that was very successful previously!

pelican's picture

As a Gen-X my advice to the millenials is don't get sucked in.  The banks through either stupidity or corruption crashed housing values for my generation.  Everything many of us worked for disappeared with a few months.  Want a nightmare?  An upside down mortgage with jobs in the area disappearing.  

In the end, no one owns anything anyway.  We all wind up in the grave and the banks take control of it again.



cnmcdee's picture

There not getting sucked in.

Each new generation is harder to con than the one previously.


pelican's picture

I was a sucker and believed in the American dream.  Now my house sits filled with the unemployed homeless and rodents.

I was such a sucker, served in the military, went to college, worked hard.  It is all BS.

Rubbish's picture

Now they intend to sucker the next gen. I can't believe they are pulling this scam again. Makes me sick.


Gold Bitchez...I pick up pennies

Everybodys All American's picture

I see these same types of buildings now all over the place where I live. I believe there are about 5 or more of these operations within a 5 mile radius and most are about 250-500 units. This is the new reality under the Obama economy. Single family homes are now considered a multi-unit building and I'd bet anything they will if not now be all federally subsidized living at some point.

SethDealer's picture

yes, freee, food, flothing, and housing... FSA Free shit Army

boogerbently's picture

How many repo's are still on the books?

How many more available?

How many yet to come?

They're worried about rehabbing the patient and they haven't even stopped the bleeding, yet.

firstdivision's picture

" This is the new reality under the Obama economy"

Yes, cause things would be sooooo different under Romney.  You really should read http://www.zerohedge.com/news/2014-11-02/what-will-change-ifwhen-republicans-take-senate, or you can continue to believe in the Donkey/Elephant show.

Everybodys All American's picture

Obama is the president mind you who has nearly doubled the debt in six years and we still see the labor participation rate plummeting. It's his record that is going to hinder this economy in the US for decades. Additionally, there are no easy answers to get the US back on track that don't entail a lot of pain for everyone.

daveO's picture

Right. The turning point came in August 2011. That's when he threatened to starve Granny if CONgress didn't vote for his spending increases. 2012, huge TEA party rout. The growth of spending has slowed since.

kaiserhoff's picture

Now is the best time to sink 300% of your income into a money pit.

   National Association of Retarded Realtors

Son of Loki's picture

There's only two families that got a 'zero-down' mortgage while everyone else we know paid at least 20% and many 50% down or 100% (esp the Chinese and Iranian neighbors...all cashola!).


Funny how those 'zero-down' families are the only two families that defaulted on their  mortgage and are in the process of being foreclosed upon.

The solution according to some of these misguided individuals is more zero-down loans.

Many Yutes don't seem to understand owning a house or any RE is a massively expensive, illiquid investment that sucks up quite a bit of your time and money -- property taxes, insurance, maintenance, and on and on are super expensive.

KnuckleDragger-X's picture

100% down and no payments. My accountant is still pissed I didn't take payments and all the wonderful 'deductions' that comes along. Of course I'm one of those evil people who believe in cash and carry.

Bay of Pigs's picture

My brother is an insurance investigator. He told me about a case last week on a home just purchased at auction by Invitation Homes. I said "That's a nice name. Which big hedge fund owns them?". He didnt know so I looked it up. Yup. Blackstone Group...Peterson and Schwarzmans outfit.

BTW, they are being sued for mold issues on some of their homes that they have "fixed up" to rent out. What a racket the rental market has become now.

firstdivision's picture

Not to fear, lending standards will continue to fall, otherwise price depreciation will hit.  TPTB need home prices to remain elevated, and the FRB will be helping.  QE5/Backdoor NINJA loans will be coming in 2015.

TheGreatRecovery's picture

More power to them.  IMHO, three-generation families are much stronger than two-generation families.  More grandparental wisdom and love available to the kids, better access to extended family; healthier for the grandparents; may make it financially possible for one of the parents to stay home.  Many advantages.  I'm think of those Mongolian families living in tiny yurts, and how much healthier and happier (and freer) they seem than American families living in 3,000 square foot McMansions.

BeerMe's picture

Maybe...As long as the parents have a good work ethic.  Sometimes it is the parents are lazy and the grandparents have to do all the parenting.

j0nx's picture

Millenials voted for hope and change. I'd say they got the change part at least. Hope? Not so much.

Miffed Microbiologist's picture

I have several work associates that, unbelievably, have 40+ year old "children" at home. If they do work, it is at fast food or other low paying jobs. One is 400+ lbs working at Game Stop so he can try out new games. His mom told me that's all he does plus look at porn all day. I don't know why they tolerate this. I once asked why they don't insist he straighten out his life. The answer was " he's shy". WTF? How this man will afford the house when his parents die is beyond me. They pay close to 8k a year just in property tax. Maybe he figures he'll die of a heart attack before the inheritance runs out.

My own daughter at 24 has a good income, lives independently and could easily qualify for a mortgage. She has no interest in saddling herself to a home and wants the freedom to move quickly if her career changes in these difficult economic times. We certainly can't fault her reasoning.

Maybe these are two extreme examples but the debt heavy Millennials don't have much wiggle room.


Jason T's picture

we need to start building smaller houses.. Levittown style again..



NoDebt's picture

No money in it.

I'm just waiting for the first serious call that "owning a home is a basic human right".  Getting closer, but not quite there yet.  Then the government will build those "starter" houses for you.  I doubt they'll call it Levittown, though.  It'll be called FEMA Camp 2487, though the locals will refer to it as 'Obamaville'.



KnuckleDragger-X's picture

Micro housing with canvas walls and plenty of chances to commune with Giaia, especially during those 4am trips to the latrine during a blizzard.....

kaiserhoff's picture

Nope.  There's tons of great houses that are empty or have one little old lady living there.

Let interest rates rise, and wait, for the dead cat bounce;)

11b40's picture

After 17 months on the market, we just got an offer on my 94 year-old Mother-in-law's modest 2 bedroom home.  We moved her to an independent living community once the household chores became too much.  This lady continued to garden and maintain her yard until she was 92, and is still in good physical shape.

The house is immaculate, the yard is spacious, well tended, and has a nice work/storage building.  It is on a circular cul-de-sac, no other houses behind it or on the left, so plenty of privacy. There is an elementary school not more than 200 yeards away, and kids can walk there without even crosing a road.  It is also near a hospital and many physicians offices.  Lot's of ahopping nearby.  It is perfect for a young family, single parent, etc.....a mellinial

We thought $75K would turn it pretty quickly, but no interest.  Also no interest at lower prices, until the last drop to $55K.  We really just want to get rid of it now, and are hopeful that nothing goes wrong before the December closing.  There were 2 offers to rent-to-own, but we were not interested in being landlords.  Both couples had cash flow for the rent, but one could not get a down payment for a loan, and the other could not qualify for a loan due to high student loan debt.

NoVa's picture

There is always seller carry back - you hold the mortgage UNLESS you need the entire sale proceeds.  

Charge a fair interest rate, say 2 or 3% annual, but make it a variable rate tied to inflation or the 1 year treasury.  Take as large of a down payment as they can afford, but without busting their savings.  

Everybody WINS:  you get a productive asset with a very good return, buyers get a nice starter home and hopefully maintain it, neighbors get a floor on their home values.