First-Time Home Buyers Are Still Squeezed

Rising home prices, tapped-out savings accounts and mortgage rates above 10% have put the squeeze on housing affordability for first-time buyers, the National Assn. of Realtors said Tuesday.

The trade group reported that first-time home buyers had just 73% of the income needed to purchase a starter home in the first quarter of 1990. The group’s first-time home-buyer affordability index was down from 74.3 in the preceding quarter. The index was 75.2 after the first three months of last year.

The realtors’ composite index, which measures housing affordability for all buyers, stood at 104.4 in the January-March period. That was down from 105.7 in the fourth quarter and 106.5 in the third.

The median income of “prime first-time home buyers”--renter families with wage earners aged between 25 and 44--was $23,123 during the first quarter. That was $8,532 less than the $31,655 needed to qualify for conventional financing covering 90% of a median-priced starter home costing $81,500, the realtors said.

“Median” means half the group are above that figure and half are below.

“A 10% down payment on a $81,500 home would amount to $8,150, leaving the typical first-time buyer during the first quarter with monthly mortgage payments of $659,” the realtors said.

Despite the gap between income and the amount needed to buy a starter home, first-time buyers are finding ways to shift from renting to owning, according to the association’s chief economist, John A. Tuccillo.

“Condominiums, alternative mortgage instruments, help from parents with deep pockets and even lease-options and equity-sharing arrangements are among the methods entry-level buyers are employing to make that first home purchase,” Tuccillo said.