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Where Are First Time Buyers?
April 1st, 2014 9:57 AM

According to the chief economist for the National Association of Realtors, first-time buyers are a shrinking share of the market.  Many renters missed out by not buying three years ago when prices were at a low point.  Now that prices have increased, only 27% of buyers are first time compared to 40% in a more normal market.

It isn't that young households don't want to buy, but their desire is not keeping up with their ability.  Many young people are not only saddled with student loan debt from college, but job creation and wages have been very slow to increase.  Also the qualified mortgage rule that took effect this year tightens how much student loan and other debt loan applicants can carry. 

This situation is a concern because all of the recent growth in new households has been among renters.  Unless a healthy portion of today's 40 million renters become homeowners, the housing market cannot grow by much. 

Many feel the new QM rules by lenders are being too strict and conservative, even though mortage default rates have been at historic lows the past couple years.  Lenders have restricted underwriting too heavily.  Also, builders need to help with more construction at moderate prices, giving buyers more of an inventory and variety of selection.

The bottom line is that housing is currently underperforming and first time homebuyers are much needed to keep the real estate market on a healthy track.  Homeownership is still "the American dream" and hopefully, this dream will become a reality for many current renters in the near future.  

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Posted by Barbara Doeringer on April 1st, 2014 9:57 AMPost a Comment

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