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Despite low mortgage rates, the US housing market still has many first-time buyers interested

Demand for homes has rebounded in recent weeks, as evidenced by mortgage application data. But first-time buyers were not behind this increase.

The latest data from the Mortgage Bankers Association, for the week ending November 26, shows that overall mortgage applications fell 7.2% on a weekly basis. But mortgage applications to buy a home rose 5.1% from the previous week, higher than the 4.7% increase the previous week.

Overall, in November, mortgage applications for home loans rose 7% in November, according to analysis from Joshua Shapiro, chief US economist at MFR Inc., figures This compares to a 1% drop in October and an 8% gain in September. But as we dig deeper into the data, it becomes clear that not all buyers are rushing back into the market in similar numbers.

‘As home prices continue to rise at double-digit rates, buyers of newer, more expensive homes continue to dominate buying activity.’


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

“As home prices continue to rise at a double-digit rate, buyers of newer, more expensive homes continue to dominate buying activity, while first-time buyer activity remains down,” said Joel Kan, vice president of economic and industry forecasting for the Mortgage Bankers Association, said in the trade group’s latest report.

Evidence for this can be seen in several data points, including the percentage of mortgage applications supported by the Federal Housing Administration. FHA loans can be a useful proxy for first-time buyer needs, as they require smaller up-front payments and lower minimum credit scores than loans backed by FHA. Fannie Mae
FNMA,
-6.83%

and Freddie Mac
FMCC,
-6.54%
.

In the most recent week, FHA loans accounted for just 9.4% of all home loan applications, down from 10.2% in the same week in 2020.

The number of first time buyers increased last year

Over the past year, the percentage of people buying a first home has actually gone up, according to recent data from the National Association of Realtors, going from 31% to 34%. Despite the increase, this is still far below the historical 40%.

And first-time buyers trying to hit that milestone did so despite many obstacles. “This year has solved some problems for many of them,” said George Ratiu, economic research manager at Realtor.com.

He added: “Early 2021 sees an overheated market in which demand for homes has increased rapidly due to the pandemic, leading to an inventory shortage due to more than a decade of facility construction. copies,” he added. According to analysis from Realtor.com, as of mid-2021, there are about 5.2 million homes missing.

“Even with low mortgage rates, it’s hard for many first-time buyers to compete with repeat buyers.”


– George Ratiu, director of economic research at Realtor.com

“Even with low mortgage rates, many first-time buyers find it difficult to compete with repeat buyers who bring in equity from a previous home or other buyers taking advantage of this,” says Ratiu. Full cash offer.

So far this fall, the housing market has cooled from the frenetic pace of early 2021, while maintaining a higher-than-normal home sales rate for this time of year. But inflation has taken a toll on buyers’ wallets – especially as rent costs soar. According to the National Association of Realtors, 73% of first-time buyers in the past year were previously renters.

Plus, mortgage rates have risen above the ultra-low levels seen in early 2021, and most economists expect them to rise as the Federal Reserve eases related stimulus measures. to the pandemic.

Adam DeSanctis, director of public affairs at the Mortgage Bankers Association.

First-time buyer success may depend on whether inventory conditions improve. Ratiu said that more homeowners are expected to list homes for sale in the coming months, which will give buyers more options and contribute to slowing the pace of high home price growth. If that expectation doesn’t come true, success may ultimately reflect which buyers have access to financial assistance.

According to the National Association of Realtors, between 2020 and 2021, 1 in 4 first-time buyers have used a gift or loan from friends or family to prepay.

Source link Despite low mortgage rates, the US housing market still has many first-time buyers interested

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