Where Have the First-Time Home Buyers Gone?
Source: Wall St. Journal
First-time home buyers aren’t playing as big a role in the mortgage market as they did a few years ago, when prices were lower and a big tax credit fueled a surge of sales. But according to researchers at the Federal Housing Finance Agency, when it comes to homes financed by conventional or government-backed loans, first-time buyers still account for a historically high share of purchases.
Making sense of the story:
• The FHFA found that the first-time buyer share of purchase-mortgage lending rose to a high of 63 percent in 2009, when Congress enacted an $8,000 tax credit for first-time buyers. That was from a nadir of 37 percent in 2003.
• First-time buyers accounted for a lower share of purchases from 2004 to 2006, when home prices were rising rapidly and credit was available on much easier terms from lenders that were selling those loans to Wall Street firms, bypassing Fannie, Freddie, and the FHA.
• First-time buyers’ share of loans began to increase steadily in 2007, until reaching that 2009 peak. Since 2009, the share of mortgages to first-time buyers has declined, dropping to 56% last year. That is still higher than at any time between 1993 and 2008.
• As expected, researchers found that the first-time buyer share tends to decline in states as home prices rise. States with the highest first-time buyer shares include California, Nevada, Maryland, New York, and Washington, D.C
• While other reports say first-time buyers are accounting for a woefully small share of the market, the FHFA research provides an interesting view of how the first-time borrower component has changed over time within a particular state. The data shows first-time buyers continue to make up a higher-than-average share of borrowers, even if they are off of their 2009 highs.
• Notably, the FHFA data doesn’t take into account the fact that the share of all-cash sales is much higher today than a few years ago.
• Also, the reported share of first-time buyers also could be higher in more expensive states due to the conforming loan limits. Fannie and Freddie, for example, can’t buy loans that exceed $417,000, though the limit was increased for certain high-cost areas in 2008.
In other news …
Bank of America to pay record $16.65 billion to settle mortgage claims
Source: LA Times
In what amounts to the largest settlement by a single company in U.S. history, the Justice Department has announced that Bank of America Corp. will pay $16.65 billion to end federal and state investigations into the sale of toxic mortgage securities during the subprime housing boom. California will receive $300 million from the settlement to reimburse the CalPERS and CalSTRS pension funds.
3 facts crippling California’s housing recovery
While California’s job growth and economy continue to improve, major hurdles remain for housing’s recovery. Firstly, affordability is a huge concern as rapid home price increases, mixed with a lack of affordable inventory is leaving little room for first-time borrowers to jump into the market. Tight credit and stagnant incomes are another concern if prices remain high.
Housing construction surges in July
Source: The Hill
During July, housing construction hit its highest level in eight months as the sector shows signs of picking up pace in the second half of the year. After two months of drops, construction jumped 15.7 percent last month to a seasonally adjusted annual rate of 1.09 million homes, the fastest pace since the 1.11 million posted in November, according to the Commerce Department.
Two Good Omens for Housing Market
Source: New York Times
Is the nation’s modest housing recovery back on track? Many experts say that appears to be the case after numbers were released from both the government and Home Depot – both of which were each higher than analysts anticipated. Home Depot’s earnings experienced solid growth, and housing starts last month were up nearly 16 percent over June.
Realtor.com: July boasts the healthiest end to spring buying season in 3 years
July shows the best price appreciation and inventory increases hit during the peak spring buying season in three years, according to data from Realtor.com. Its data reveals homeowners are more optimistic about selling than in previous years. Jonathan Smoke, chief economist for realtor.com, commented, “This year, we’re ending the traditional season with high buyer and seller confidence demonstrated by price appreciation, increases in inventory, and quick home sales.”
Where Cash Buys Are Hitting the Housing Market Hardest
Source: The Atlantic
Almost 40 percent of all U.S. home sales in the second quarter of 2014 were all-cash purchases, according to the latest report from RealtyTrac.com. For a handful of states, nearly half the home sales in Q2 were all-cash buys: Florida led the way (57.9 percent), followed by Michigan (49.7), New York (48.8), and Nevada (48.3). In Virginia, the state with one of the lowest figures, all-cash purchases still accounted for more than one-fifth of home sales (22.2 percent).
Talking Points …
• California home sales posted higher for the second straight month, and while the statewide median home price rose from the previous month as well as a year ago, the pace of appreciation continued to slow, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
• Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 398,940 units in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. July marked the ninth straight month that sales were below the 400,000 level and a full year that sales have declined on a year-over-year basis.
• Sales in July increased 1.2 percent from a revised 394,250 in June but were down 10 percent from a revised 443,500 in July 2013. The July 2014 sales rate was the highest since October 2013. The statewide sales figure represents what would be the total number of homes sold during 2014 if sales maintained the July pace throughout the year.
Thanks for reading! Call with questions.
David S. Wilfert
RE/MAX R.E.O. – The Wilfert Group
12341 Newport Avenue, Suite A-100, North Tustin, CA 92705
Real Estate Broker – BRE# 01861699
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Direct: (714) 963-8000 or Email: David@WilfertGroup.com