First-Time Home Buyers Missing Out on Housing Recovery
As the housing market continues to show improved signs of strength, many first-time home buyers are failing to benefit from the broader recovery.
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, released last week, found that first-time home buyers were purchasing only 34.7 percent of the homes sold in October. That’s down from 37.1 percent in September, and is the lowest percentage ever recorded by the survey.
This decline surfaces as purchases of non-distressed homes—houses that are not in foreclosure—have increased dramatically in 2012. The report shows that the vast majority of the homes being sold are regular purchases—accounting for 64.7 percent of all houses sold in October, up from 55.7 percent in February. The increase is a sign of strength in the housing market, as fewer people are buying homes in foreclosure.
But according to the survey, first-time buyers are the only group that has not purchased more non-distressed properties in the last five months. Meanwhile, current homeowners are picking up an increasing number of properties, purchasing 54.4 percent of all homes in October, up from 50 percent in June.
The Perfect Real Estate Market for First-Time Home Buyers
If you are a first-time home buyer who has been looking for the perfect opportunity to buy a new home, then the time is now. The current real estate market is perfect for everything from buying a new home to investing in the real estate market, which is why first-time home buyers and investors have been going head to head and competing for the best real estate on the market.
Why, exactly, is now a great time for first time home buyers to purchase a new home? From incredible deals on foreclosure and short sales to low interest rates and a projection for rising home prices in the future, now is the perfect real estate market for first-time home buyers.
If you are a first-time home buyer looking to buy a new home in the current real estate market then you are more than likely looking for the best deals possible. Fortunately, with the number of foreclosures and short sales on the market, you can find discounted properties that are well below market value, which essentially allows for a lower monthly mortgage payment.
Buying That First Home Is Getting Harder
The housing market may be recovering, but not everyone’s along for the ride. First-time buyers are becoming a shrinking share of purchasers, according to the results of a monthly survey of 2,500 real estate agents. New home buyers made just 34.7 percent of all purchases in October, the lowest since the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey started in September 2009. Three years ago, first-time borrowers were 47 percent of all buyers, buoyed at the time in part by a tax credit.
First-time homeowners, who typically buy lower-priced homes and need extra financing, are losing share as the market shifts from distressed properties such as foreclosures. Distressed sales, which usually cost less, were almost half of all of purchases a year ago, but now they’re just over a third of sales. At the same time, prices for all existing homes have been rising—prices were up 4.4 percent in September over the previous year, according to the Federal Housing Finance Agency—making homes less affordable for first-time buyers.
For new buyers, rising prices are coupled with difficulties in getting a mortgage. About half of all first-time buyers get their loans through HUD’s Federal Housing Administration, which allows down payments as low as 3.5 percent. Because loans with lower down payments are riskier, the FHA’s rates are typically higher than those of traditional mortgages. With interest rates at near-record lows, the incremental difference wasn’t causing much consternation in the past. But facing concerns that it has taken on too much risk and may need a bailout, the FHA raised rates in August and plans to do so again next year.