Across the nation and especially in sought after California areas, first-time buyers are missing in action. While first-time buyers have traditionally accounted for close to 40% of home purchases in the resale market, the National Assn. of Realtors reports first-time buyers were just 28% in April and 34% in May 2012.
Heavy student debt is among the many reasons why first-time buyers are postponing home ownership. Researchers for the One Wisconsin Institute found that the rate of homeownership among individuals who are paying off student loans is 36% lower than among their debt free peers.
Chief economist for Zillow, Stan Humphries, cites three reasons for this trend. Low appraisals in up trending markets are resulting in high down payment requirements for conventional loans. Additionally, recent premium hikes are making FHA loans more expensive than competing conventional mortgages.
Secondly, negative equity continues to be a problem for potentially trapped sellers of lower priced start-up homes that traditionally appeal to first-time buyers. About 40% of owners in the 35 to 39 age bracket are still underwater on their mortgages.
Lastly, first-time buyers are frequently losing out to cash-rich investors who bring cash to the table with no financing contingencies.
Are first-time buyers struggling in your area? We’d like to know!
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