Peter Muoio EVP and Chief Economist at Ten-X Peter Muoio, Ph.D., is chief economist for Ten-X Research. He is a veteran of the real estate industry and founder of the research and consulting firm Maximus Advisors, which Ten-X acquired in December 2012. Immediately prior to forming Maximus Advisors, Dr. Muoio was a Managing Director and Global Head of Deutsche Bank’s Real Estate Research Group with teams in New York, London, Frankfurt and Sydney. Prior to that, he formed and led the Real Estate Research Group at Bankers Trust Company. Dr. Muoio has also served as an instructor at Hofstra University where he taught Industrial Organization and worked as a Research Associate at the WEFA Group, an economic consulting firm.
STARTER HOME : LOW SUPPLY MEETS LOW DEMAND?
Across the country, the low inventory of homes for sale has dominated housing headlines, limiting stronger sales growth while fueling large price gains; and ultimately feeding into the problem of declining affordability. The National Association of Realtors (NAR) has noted the particularly low number of starter homes for sale as a key factor keeping potential first-time buyers on the sidelines. According to the NAR , the percentage of first-time buyers continues to hover at a low level, accounting for just 33 percent of home sales in July. It’s logical to point to a low inventory of starter homes as a key stress point that would otherwise enable a higher homeownership rate, which is undoubtedly true. Potential first- time buyers are also grappling with unprecedented student debt, surging home prices, and stricter lending standards, all of which inhibit their path to homeownership. However, according to a recent Bank of America report, a weaker underlying demand for starter homes may be a deceptive culprit that is also keeping first- time buyers at bay. The Bank of America Homebuyer Insights Report features survey results from a thousand adults throughout the country who want to buy a home in the future, and some strong preferences emerge from the results. A whopping 75 percent of potential buyers indicated that they would prefer to skip purchasing a starter home and instead go with a home that meets their future needs, with 69 percent saying they would rather save money to purchase a nicer home in the future than move into a starter home right away. When potential buyers were asked why they have not yet purchased a
home, 56 percent responded that they did not think they were able to afford the type of home they would want, which could partially reflect the deteriorating affordability for homebuyers, but also reveals the desire to buy something more than a traditional starter home. Additionally, more than one-third of respondents also said they want to retire in their first home, a swift departure from the concept of purchasing a starter home and eventually trading up.
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Which describes the type of home you’re looking for?
A home that I can grow into and will fit my needs in a few years, even if it doesn’t now 75% A home that fits my needs today, but may not be right for me in a few years 25%
Which would you rather do?
Wait to save more money and move into a nicer home in the future 69%
Move into a starter home now 25%
Source: Bank of America
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