Daily Real Estate News | March 28, 2011
Where Did All the First-time Buyers Go?
In January, first-time home buyers made up 29 percent of the market, the lowest since the National Association of REALTORS® started tracking first-time buyers on a monthly basis in 2008.
In a healthy market, first-time buyers generally make up 40 percent to 45 percent of all purchasers. So with low interest rates and falling housing prices, why are first-time home buyers sitting on the sidelines?
A USA Today article highlighted some of the factors that have first-time home buyers skittish about the market:
Tougher lending standards: Some first-timer buyers can’t meet credit or employment history requirements, Guy Cecala, publisher of Inside Mortgage Finance, told USA Today. Lenders also are requiring higher credit scores and some want higher down payments that are shutting out more first-timers. The best loan terms usually require 20 percent down payment or more, says Greg McBride, senior analyst at Bankrate.com.
Expired tax credits: Federal incentives that included lures for first-time buyers gave a big boost to home sales in 2009 and 2010. But with those tax credits now expired, first-time buyers aren’t as eager to jump in to the housing market.
Competition from cash buyers: NAR reports that cash buyers accounted for a record-reaching 33 percent of existing-home sales in February. Sellers like cash deals because those transactions are more likely to close, says Jerry Abbott of Grupe Real Estate in Stockton, Calif. As such, competing against these cash buyers has left some first-time home buyers out.
Source: “First-time Home Buyers Getting Shut Out,” USA Today (March 28, 2011)
