Despite low mortgage rates, the American real estate market keeps many first-time buyers on the sidelines

In the past few weeks, demand for home purchases has rebounded, according to mortgage application data. But first-time buyers are not behind the increase.

The latest data from the Mortgage Bankers Association for the week ending November 26th showed the total number of mortgage applications on a weekly basis decreased 7.2%. But home-purchase mortgage applications rose 5.1% week-on-week, building on the 4.7% increase the previous week.

Overall, November home purchase mortgage applications rose 7% in November, according to an analysis by Joshua Shapiro, U.S. chief economist at MFR Inc., compared to a 1% decrease in October and an increase of 8 % in September. But when you dig deeper into the data, it becomes clear that not all buyers are returning to the market in similar numbers.

“As home prices continue to rise in the double-digit range, buyers of newer, more expensive homes continue to dominate buying activity.”

– Joel Kan, vice president, economic and industry forecasting, Mortgage Bankers Association

“As home prices continue to surge in double digits, new, higher-priced home buyers continue to dominate buying activity while first-time buyers remain subdued,” said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association it in the latest report from the trade group.

This can be seen from a number of data points, including the proportion of mortgage applications from the Federal Housing Administration. FHA loans can be a useful guide to first-time buyer demand as they require lower down payments and lower minimum credit ratings than Fannie Mae FNMA supported loans.
and Freddie Mac FMCC,

Last week, FHA loans made up only 9.4% of total purchase credit applications, up from 10.2% in the same week in 2020.

The number of first-time buyers has increased over the past year

Last year, the proportion of buyers who bought their first home rose from 31% to 34%, according to the latest data from the National Association of Real Estate Agents. Despite the increase, the value remained well below the historical norm of 40%.

And the first-time buyers who managed to reach this milestone did so despite many obstacles. “This year has been a tough one for many of them,” said George Ratiu, manager of economic research at

“Early 2021 saw an overheated market where pandemic accelerated home demand poured headlong into a market starving for inventory due to over a decade of sub-construction,” he added. According to an analysis by, around 5.2 million apartments were missing in mid-2021.

“Even with low mortgage rates, many first-time buyers found it difficult to compete with repeat buyers.”

– George Ratiu, Economic Research Manager at

“Even with low mortgage rates, many first-time buyers have found it difficult to compete with repeat buyers who bring equity from a previous home or other buyers who take advantage of cash-only offers,” said Ratiu.

So far this fall, the housing market has cooled from the insane pace at the beginning of 2021, while the home sales rate is higher than typical for this time of year. But inflation has put a strain on would-be buyers’ pockets – especially when it comes to rising rental costs. According to the National Association of Realtors, 73% of first-time buyers in the previous year were renters.

Also, mortgage rates have risen above the ultra-low levels seen in early 2021, and most economists expect them to rise as the Federal Reserve relaxes its pandemic-induced incentives.

“Millennials are out there, but greater success in actually buying a home comes from those with bigger budgets – they can bid and have more inventory to choose from, especially for new homes,” said Adam DeSanctis, director of public affairs for the Mortgage Bankers Association .

The success of first-time buyers could depend on whether the inventory situation improves. Ratiu said more homeowners are expected to have their homes up for sale in the coming months, which would give buyers more options and dampen the high growth in home prices. If that expectation is not met, success in the end could be a reflection of which buyers have access to financial assistance.

According to the National Association of Realtors, between 2020 and 2021, more than one in four first-time buyers used a gift or loan from friends or family to make their down payment.

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