“Wisdom hath built herself a house, “ says King Solomon in Proverbs 9:1. And in today’s world, the wise King’s words point up the smart move of buying houses. But many would be homebuyers remain locked out of the process, thanks to factors including more stringent mortgage lending standards and an iffy employment picture. And that means an ever-expanding pool of renters.
Traditionally, first time homebuyers have tended to be young, secure in the workforce and ready to start a family. But today’s economic realities have changed that picture. More and more college graduates are leaving school with a burden of thousands in student debt – a phenomenon we’ve discussed in previous posts. That kind of debt makes recent grads reluctant to take on more debts in the form of mortgages. Not only that, defaulting on student debt damages the credit needed to qualify for a home loan.
Aside from student loan debt, an iffy employment picture means that some potential buyers simply don’t have the income available to swing a home purchase. Because of the Qualified Mortgage Rule and other new regulations, many loan types are requiring higher down payments – and imposing tighter standards for borrowing, which eliminates lower income purchasers.
What’s more the kinds of lower priced houses that are traditionally bought as “starter” homes re in short supply in some markets. Many current owners of those homes are still underwater with their mortgages or are unable to sell for other reasons, so the remaining houses available for sale may be priced out of a first time buyer’s budget.
Those low-cost, often foreclosed homes that firsts time buyers might be able to afford are also the target of barge-scale investors who can pay cash for properties for a quick transaction that removes them from the market. That effectively shuts out would be homebuyers who may be ready to buy – but find now houses they can afford.
The absence of the first time buyer form the market affects the evolving housing recovery in several ways. The grown of the housing market then rests on refinancing, new home starts and investor activity, as well s the movement of larger homes for which there are no new buyers. And because potential first time buyers are either choosing not to purchase or are locked out of the process entirely, the pool of renters continues to expand – good news for become property investors following Jason Hartman’s recommendations for building wealth in real estate. (Top image: Flickr/CatieRhodes)
RE Insider. “Are First-Time Buyers An Endangered Species?” REOnsider.com.. 16 Jul 2013.
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Is Another Housing Bubble About to Burst?
The Solomon Success Team