Simplex Open House

Tuesday, November 27, 2012

Are First Time New Home Buyers Becoming Extinct?


Current homeowners accounted for 54 percent of October’s non-distressed market, up from 50 percent in June, according to a new survey by Campbell/Inside Mortgage Finance.

This as the share of non-distressed sales surged to 64.7 percent, up from 55.7 percent as recently as February.

Unfortunately, first-time home buyers are seeing just the opposite, largely left out of this surge in sales and prices. Their share of the market, usually up in the 40 percent range historically, fell to 34.7 percent in October, the lowest in the Campbell/IMF survey’s three-year history.

The National Association of Realtors put their share even lower, at 31 percent. If you look at the banking regulations put on lenders and the cost for the new construction, the share drops to almost single digits for the this buyer.

Either way, they are the only group of buyers that have not seen their share of non-distressed home purchases rise over the past five months. The mortgage of choice for these buyers, FHA-insured loans, are increasingly tough to obtain.


“Financing of first-time homebuyers with low down payments threatens to become a significant problem in the U.S. housing market,” wrote Thomas Popik, research director for Campbell Surveys. “Fifty percent of first-time homebuyers use FHA financing, but FHA insurance premiums are increasing and underwriting is becoming more strict. Private mortgage insurance has started to fill the gap, but the long-term status of private mortgage insurance is in question pending the publication of the Qualified Residential Mortgage regulation resulting from Dodd-Frank.”

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