Things are looking pretty glum for first-time buyers trying to get a foothold on the housing market, after it was revealed that this demographic accounted for just 27 percent of home sales nationwide last month. This is well down on the typical levels, where first-time buyers account for around 40 percent of the market, reports CNBC news.
But why is the number of first-time buyers falling so fast? Housing experts point to several hurdles, such as high student loan debt, less-than-perfect credit, low employment and wage growth, and the double-digit growth in home prices this past year.
First-time home buyers tend to purchase lower-priced homes, but they’re facing competition for those homes from all-cash investors. Cash purchases accounted for 42.1 percent of all U.S. home sales in December, up from 38.1 percent in November, and up from 18 percent a year prior, according to RealtyTrac.
Tight credit is also preventing younger home buyers from qualifying for a mortgage to buy a home, as mortgage lenders require higher down payments. FHA loans, which many first-time home buyers turn to for the low downpayment requirements, have seen their market share decrease recently after an increase in premiums and fees this year made them less attractive to some.
However, Fannie Mae and Freddie Mac are lending more to first-time buyers, according to a report from Inside Mortgage Finance. The share of financing for first-time home buyers by the mortgage giants reached 19.5 percent in December, up from 14.1 percent a year prior.