New buyers are gradually increasing their stake in the housing market. First-timers comprised 32 percent of existing-home sales in March, up from 30 percent a year ago and 29 percent in 2014.
The looming threat of interest rate increases may be prompting more buyers to enter the market this year. But also, sustained job and income growth is playing a role, according to last month’s REALTORS® Confidence Index. The aging of the millennial generation may also be modestly increasing buying behavior; the report notes that first-time buyers are most likely to be between the ages of 25 and 34.
“REALTORS® in most markets are saying interest from first-timers is up this year, but competition is stiff for listings in their price range,” says William E. Brown, president of the National Association of REALTORS®.
The good news is those who do find a home in their price range aren’t having to bring their life savings to the closing table. Sixty-three percent of first-time buyers put down anywhere from zero to 6 percent to secure a mortgage. In opening the credit box, the Federal Housing Administration has reduced its annual mortgage insurance premiums and the government-sponsored enterprises—Fannie Mae and Freddie Mac—now accept mortgages with 3 percent down.
That said, the report notes that the impact of these measures in attracting first-timers is modest due to a general lack of knowledge about the opportunities available. Only 13 percent of those aged 34 years or younger believe they can purchase a home with a down payment of 5 percent or less, according to NAR’s 2016 Third Quarter Housing Opportunities and Market Experience (HOME) Survey.
—Melissa Dittmann Tracey, REALTOR® Magazine