First Time Home Buyers – What They Mean to the Real Estate Market
Fortune magazine ran a timely and informative article on the housing market recently, affirming a lot of what has appeared in these missives regarding the relationship between price and demand. In short, Fortune noted that lower prices are enticing more people back to the housing market, especially first-time buyers.
Fortune expounded further on the importance of the first-time buyer to the market, noting that the housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.
The return of first-time buyers is expected to help reduce the overhang of new homes. Bernard Markstein, senior economist for the National Association of Home Builders, believes that the first-time buyer could push new-home sales to almost 700,000 units by the end of 2009, meaning sales could exceed new production by as much as 250,000 units a year. Increased demand coupled with dwindling supply means home prices will eventually have to rise.