The nasty late spring that kept the northern states frozen into March and early April delayed the annual spring buying season for thousands of sellers and buyers, including first-time buyers. Now that the sun is shining there’s no excuse and a lot of concern for the poor showing first-timers are making these days.
This week the National Association of Realtors reported that the percent share of first-time buyers continued to underperform. In its May Realtor Confidence Index, based on a monthly survey of Realtors, found t representing less than one- third of all buyers at 27 percent in May, down from 29 percent in April; they were 29 percent in April 2013.
Typically, first-time buyers account for 40 percent or more of sales. First- time buyers play a vital role in the marketplace because when the purchase a home, they are not also selling one, creating a net decline in inventories. Without first-time buyers, existing owners cannot sell and buy a new home.
“Tight underwriting standards are especially challenging for first-time buyers, who generally need mortgage financing with low downpayment terms, who may be paying off student debt, and who have credit scores that are not top-notch. Realtors have also reported that the increase in FHA mortgage insurance costs is discouraging buyers or making loans unaffordable,” said NAR chief economist Lawrence Yun.
Approximately 27 percent of Realtors respondents reported that their last transaction in May was by a first time home buyer, down from 29 percent in April.
A similar survey of Realtors by Campbell Surveys for Inside Mortgage Finance, also leased this week, found that the first-timer market share has increased slightly this spring, rather than decreased. First-time homebuyers accounted for 36.1 percent of home purchases in May, based on a three-month moving average, up from a 34.0 percent share in February.
However, the increase is part of a seasonal trend, said Tom Popik, research director at Campbell Surveys. “Increased participation of first-time homebuyers in the spring and summer is a normal seasonal pattern and this year is no exception.”
In face the first-time homebuyer share of purchase activity pealed last May at 36.6 percent, slightly higher than this year. In June 2012, the first-timer share peaked at 37.1 percent.
In real terms, first timer purchases might have increased slightly over last year since existing homes currently are selling at a slightly higher rate this year than last. Total sales in 2012 were 4.65 million, the most since 2007, according to NAR. The National Association of Realtors said on Monday existing home sales increased 4.9 percent to an annual rate of 4.89 million units in May.