The amount of those who are getting involved in the housing market for the first time is at a low level, despite the housing market recovery picking up in recent months.
Those who were first-time homebuyers purchased fewer than 35 percent of all homes on the market last month, the HousingPulseTracking Survey from Campbell/Inside Mortgage reported. This was the lowest figure in the history of the survey, as well as nearly three percentage points lower than the figure recorded in June.
Many of these prospective homebuyers don't have the capabilities to acquire financing, while jumps in home prices further hurt their chances, the survey explained. The most widely available home financing options for many first-time homebuyers is through the Federal Housing Administration the FHA program. This may not be viable for many consumers for much longer.
"Financing of first-time homebuyers with low down payments threatens to become a significant problem in the U.S. housing market," said Thomas Popik, research director for Campbell Surveys. "Fifty percent of first-time homebuyers use FHA financing, but FHA insurance premiums are increasing and underwriting is becoming more strict. Private mortgage insurance has started to fill the gap, but the long-term status of private mortgage insurance is in question pending the publication of the Qualified Residential Mortgage regulation resulting from Dodd-Frank."
Healthy properties increase in the market, may affect first-timers
While the level of first-time home buyers dropped significantly in recent months, the level of distressed properties on the market also fell, the survey's property data showed. The level of non-distressed home purchases rose to nearly two-thirds of all residential purchases last month, far higher than in February, when the figure was less than 56 percent of all purchases.
Those who already own a home, but purchased a non-distressed property jumped to more than 54 percent of all properties purchased by this group in October, according to the report. This was an increase from June's level of 50 percent.
While the level of home purchases from first-time homebuyers fell in recent months, the level of home sales increased markedly. Real estate records from the National Association of Realtors showed the level of existing-home sales increased to a seasonally-adjusted annual rate of 4.79 million last month, which was more than 2 percent higher than the previous month's figure. Additionally, it was 10.9 percent higher year-over-year.