December 29th, 2014
Recent existing-home sales data from the National Association of Realtors (NAR) has shown there has finally been an increase in the share of first-time homebuyers in the housing market.
In November, 31 percent of sales of existing homes went to first-timers. This represented an increase from 29 percent in October. Furthermore, this group’s share of the market hasn’t been this high since October 2012, and the average percentage held steady in 2014 at 29 percent through November.
How the industry has responded
According to Business Insider, one senior economist said the rise in first-time buyers is encouraging, though the percentage is still shy of market share seen when the housing and economic markets are stable. The economist cited more access to mortgage credit as one way for first-timers to become more engaged in homebuying.
Chris Polychron, NAR president and executive broker at 1st Choice Realty, agreed with this sentiment, particularly in regard to low-down-payment mortgages to be offered by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
“NAR applauds Fannie and Freddie’s commitment to homeownership by serving creditworthy borrowers who lack the resources for substantial down payments plus closing costs with its new down payment program,” Polychron said in the NAR news release. “The new program mitigates risk with strong underwriting and ensures that responsible buyers have access to safe and affordable mortgage credit.”
What’s keeping first-timers out of the market?
Veros Real Estate Solutions also published a report that tracked the share of first-time buyers, noting a decline to 33 percent. The real estate software developer cited tight lending standards as the key deterrent to millennial first-timers in particular, highlighting higher down payment requirements as the main concern.
Eric Fox, vice president of statistical and economic modeling for Veros, agreed that the new loan offerings from Fannie and Freddie will be a huge help in giving these potential buyers more access to the market by addressing their most pressing issues.
“While we are seeing a worrisome drop in first-time homebuyers, there are policy changes being put into place with the intent to move the needle on the growth of this particular homebuyer, specifically with the GSEs new policy of 97 percent loan to value,” Fox said.
The overall sentiment for the future appears to be optimism, as realtor.com Chief Economist Jonathan Smoke predicted millennials will have a strong presence in the homebuying market in 2015.