Fewer Sales to First-Time Home Buyers

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The US housing market has not been performing as well as expected since the beginning of 2014 after last year’s major improvement. One of the major concerns is the low number of sales made to first-time home buyers. Currently, it is two times lower than the normal level before the crisis of 2007.

So far in 2014, only 16% of all home sales are made to first-time buyers. Before the housing market crisis of 2007, this number was over 30%. The major decrease in the sales to first-time home buyers actually follows a general decrease in sales by 7% on an annul basis. The low demand in the housing market is coupled with a decreasing number of housing starts. In fact, the current level of housing starts is the lowest since WWII.

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There are several factors contributing to the low level of sales to first-time home buyers. The primary one is that the majority of young people are not able to afford a home. The conventional mortgages have interest rates which are close to the historic low, but they require a large down payment of 20%. At the same time, most young people cannot afford to save much due to the high rental rates and the ever larger student loans. The FHA loans have smaller down payment, but due to this factor and the considerably increased insurance cost, the monthly payments are on average 44% larger than those on conventional loans.

The inventory remains low despite the slight improvement in the spring of 2014. This is another factor with a negative effect. The low inventory will tend to keep prices high even with a falling demand. It is not expected to improve considerably in the short term due to the sluggish construction of new homes.

All predictions are that the housing market will eventually recover along with the whole economy, but this process will be slower than previously expected.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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