The market posted better numbers than expected in September, perhaps the start of a strong finish for 2014. Overall, we continued the slow transition to a “no drama” market. The window for first-time buyers to join the ranks of homeowners, and thereby change the trajectory of their life, remains wide open. More on the benefits of home ownership after a quick look at the data.
The volume of real estate sold across all Front Range markets in September of 2014 was 8.9% higher than September of 2013. The inventory of homes for sale increased to 2.3 months, continuing the glacial return to a more balanced inventory level of 5 to 7 months.
In Boulder County, sales volume increased 11.9% on a year-over-year basis in September. The supply of available homes in Boulder County increased to 3.2 months.
The trend of increasing inventory is giving buyers a few more choices and just a bit more leverage to negotiate price this autumn. Many first-time buyers are seizing the opportunity and becoming homeowners. That said, an even greater number appear to be sitting on the sidelines, scared away by tales of not being able to secure a mortgage, or still jaded by the housing downturn and waiting for another price correction. And waiting could prove to be a mistake for the Millennials, the generation aged 18 to 33. Why a mistake? Because those who choose the path of homeownership are putting themselves on a fundamentally different trajectory in life than those who choose to remain renters.
A survey of Consumer Finances conducted by the Federal Reserve every three years was updated in September. Some of the findings revealed in the report:
- The average homeowner has a net worth of $194,500
- The average net worth of a renter is $5,400
- A homeowner’s net worth is over 36 times greater than that of a renter
It’s important to note that the survey results include any drop in net worth due the housing correction of 2006. However, those who are skeptical might argue that the logic of this survey is somewhat circular, in that those who can afford to purchase a home are not surprisingly going to have a higher net worth.
The counter to this argument is that the average American family, including both homeowners and renters, has a net worth of $81,200, and of that net worth, 61.4%, is in home equity. Conclusion: those who can scrape together a down payment (through savings, an assistance program, help from family, or all of the above) and make a purchase will start building their net worth, and those who remain renters will be shut out of that “61.4%” in upside potential.
This may not be the perfect time for Millennials, or anyone else for that matter, to buy, but it’s also clearly not a bad time to buy. Timing the market is difficult, if not impossible. The great news is that in real estate, markets move slow and as a result, you don’t need to have perfect timing. You just need to get in the game. When we look back a decade or two from now, we’ll probably find that the first-time buyers who got in the game during the housing recovery and low interest rates of this period set themselves up pretty well. The American dream of homeownership is alive and well, and still provides a path to prosperity.