First-Time Home buyers purchases are declining. Why?
One theory is that all cash offers are crowding first time home buyers out of the market.
A recent report released by Realty Trac shows that all cash purchases were 42.1 percent of all residential sales in the US in December 2013. That is up from 38.1 percent in November and more than double from the 18 percent reported December 2012.
First time buyers tend to enter the real estate market at the lower priced end. Unfortunately for them, this is also the market targeted by all-cash investors looking to capitalize from the lower priced offered by distressed properties.
The National Association of Realtors began tracking the first time home buyer stats in 2008. Historically, first time home buyers have made up about 40 percent of the market but they accounted for only 27 percent of sales nationally in December 2013, the lowest percentage yet.
The tighter mortgage requirements are also seen as a contributing factor for the declining market share of first time home buyers.
With an ever increasing student loan debt and low employment and income growth, first time home buyers find it difficult to meet the tighter criteria of conventional loans. Turning to parents for assistance is no longer an option for many as the financial crisis hit older Americans as well.
Though not ideal due to the higher mortgage insurance premiums, and FHA loan is often the only option available for first time home buyers. Particularly since the QM rules became effective earlier this month and FHA loans are not subject to the restrictions of the Qualified Mortgage Rules.
What many forget is that there are programs still available to assist first time home buyers – anything from grants for closing costs and down payment to silent second mortgages to help reduce the monthly housing payment.
The key is to work with a lender that is well versed in the availability of those programs for the specific market that you are in. Most programs are run by local organizations much like the programs offered in San Diego by the San Diego Housing Commission, or County of San Diego. An out of town lender is not likely to be familiar or aware of such programs.
Contact me or your local lender for more information on Down Payment assistance programs for First time Home buyers.