U.S. Housing Market Witnesses a Fall in First Time Home Buyers
The U.S. housing market is witnessing a significant fall in the number of first-time homebuyers. The national sales figure for first time buyers dropped from an average of 40% to a mere 27% in the month of December last year.
The fall is peculiarly notable among young homebuyers living in high cost metropolitan areas. The housing market analysts are attributing this fall to the rise in all-cash sales that are making up a high fraction of all U.S. residential sales. First time homebuyers have no option but to take a back seat as financially stronger investors, who can afford all-cash offers, outrace them.
Another probable reason for the fall is recent step taken by Federal Housing Administration to reduce the upper ceiling on mortgage that can qualify for FHA insurance. While 89 counties will enjoy an increase in the loan limit, 652 counties will suffer a drop in the limit. The lowering of FHA loan limit played a crucial role in driving the gradual declination in number of first time buyers and created ripples across the U.S. housing market. Other factors, equally contributing to the decline, were tighter credit standards and the simple brutal fact that housing prices skyrocketed in the year 2013. The housing market experts forecasted the decline but they didn’t expect the decline to be that bad. The multitude of factors has definitely made home buying a distant reality for many young homebuyers.
Since first time buyers comprise a significant percentage of the homebuyers, there will be strong implications of this fall on the housing market. With consumers held back by heavier down payments, heftier premiums, higher rates and fatter fees, the housing recovery will be slowed down significantly.