Alyse Houghton has learned an important lesson during her search for a new home in Valparaiso: "When you see something you like, you need to move quickly."
Houghton made that observation during a visit to a home for sale with Realtors Matt Welter and Matt Evans, of RE/MAX Pace Realty. It was the 11th home they'd visited during Houghton's search for her first house.
Houghton, 28, said she contacts Welter as soon as she sees something that might be a good fit. "If you like something, you have to get out there immediately," she said.
That's generally true in the local and national housing markets, according to Realtors, but particularly so for houses at or below the median price.
The percent of all homebuyers purchasing their first home has remained low nationally in the years since the housing crash and recession. First-time buyers made up 32 percent of all purchasers in 2015, according to the National Association of Realtors' 2015 "Profile of Homebuyers and Sellers." The average since the study began in 1980 has been close to 40 percent.
In June, National Association of Realtors Chief Economist Lawrence Yun said that despite the fact new home construction has "crept higher" in 2016, "there's still a glaring need for even more, to help alleviate the supply pressures that are severely limiting choices and pushing prices out of reach for plenty of prospective first-time buyers."
Sales have continued to increase in 2016, growing 11.5 percent in Northwest Indiana during the first six months of the year as compared to the first half of 2015.
The increase in buyer activity hasn't been matched by an increase in available inventory, putting upward pressure on prices. The median price has continued to rise, up 6.2 percent in the first half of this year compared to 2015.
The greatest price pressure tends to be at the low end of the price spectrum. Zillow, an online real estate marketplace, reported in its May 2016 market report that entry-level home values rose 8 percent over the previous year, twice as fast as top-tier homes.
Homes that are being built tend to be higher-priced. In Lake County, 825 building permits for single-family homes were issued in 2015. The peak year this century was 2005, when 2,185 permits were issued. The average construction cost of a single-family home, meanwhile, has been rising. It was about $243,000 last year, up from $146,000 in 2000.
The story is similar in Porter County: 354 permits in 2015, as compared to 1,272 in 2005. The average construction cost was about $280,000 in 2015; it was $148,000 in 2000.
"It's really hard to build a home that's sub-150 right now," Evans said. "There's really no margin in that for developers."
Slow start for millennials
That's hit younger buyers, who tend to focus on cheaper homes, in particular. Though millennials — the country's largest generation, born between 1980 and 1997 — make up the largest portion of homebuyers, they haven't been entering the market as early as previous generations.
In 2014, 32 percent of 18- to 34-year-olds lived with one or both parents, according to a Pew Research Center study. It was the first year that living "at home" was the most common living arrangement for young adults.
Many have trouble saving enough for a down payment. Young men without a college degree are making less money, young adults are marrying later and student debt and high rent prevent saving for down payments. The rising cost of health care also "puts a pinch on purchasing power," Evans said.
But homeownership remains a common aspiration. For a prospective buyer like Houghton, "it feels like I'm taking that next big step."
Houghton's move from a condominium to a single-family home allows her to have a yard, and "to pick my carpet, my countertops. I want to be able to do what I want to do with my living space," she said.
As young adults continue to find their way in the market, more of them are heading out of urban areas to find cheaper, more spacious homes in suburbs. In Northwest Indiana, communities such as Griffith and Highland, with older, smaller homes, are seeing higher interest among first-time buyers.
In 2015, 63.7 percent of homes were owner-occupied. That's down from the 2004 peak of 69 percent, Harvard University's Joint Center for Housing Studies reported in its 2016 State of the Nation's Housing report.
"Over the next few years, homeownership will continue to face the headwinds created by a backlog of homes in foreclosure, tight credit, weak income growth and impaired credit histories. But as these pressures ease, there is every reason to expect homeownership rates to show some increase," the study concluded.
Realtors and analysts tend to see the tight supply loosening in the future.
Last month, the share of first-time buyers nationally was 33 percent, up from 30 percent in May. While still below the long-run average, National Association of Realtors economist Yun said it was "perhaps a hopeful indication that more affordable, lower-priced homes are beginning to make their way into the market."
"We're starting to see construction kick in," Evans said. He said new developments in Valparaiso will offer more moderately priced new homes.
And interest rates on mortgages remain at historic lows. Last week, Freddie Mac reported the interest rate on a fixed, 30-year mortgage averaged 3.48 percent in the United States. During the housing boom in the early 2000s, interest rates averaged from 5 to 7 percent. In the early 1980s, interest rates averaged anywhere from 13 to 17 percent.
Kim Odegard, of Keller Williams Preferred Real Estate in Schererville, said younger buyers are finding ways to make that crucial down payment.
"It seems that millennials are doing better preparing themselves," she said.
Odegard said she's seen more young buyers, and recently has had some willing and able to purchase more expensive homes.
For the time being, though, the market remains tight, and patience is a required trait.
"You have to weigh all the options and what you can handle realistically," Houghton said.