Posted on 07/08/2013 9:54:59 AM PDT by Kaslin
How do you reconcile these recent reports on housing? The National Association of Realtors (NAR) reported a surge in pending sale contracts in May to the highest level since 2006. Simultaneously Bloomberg reported that mortgage applications fell to their lowest level in nineteen months.
Cash must be king? According to NAR 33% of existing home sales in May were cash. What portion of those cash sales do you think were from first time home buyers? My guess would be somewhere between zero and one percent.
The first time home buyer has always been the most important buyer in the market, at least to main street American families. The first time home buyer starts the dominoes falling for larger purchases.
The Catch22 in housing: I won’t buy another home until my home is sold, but I won’t sell my home until I know where I’m moving. Life just isn’t fair sometimes, but without the first time home buyer in numbers many sellers won’t need worry about where they will be moving.
First time home buyers accounted for only 28% of sales in May, down from 34% a year prior, and from the 40% norm. That’s huge. This means there won’t be as many dominoes falling this summer.
Why is there a dwindling number of first time home buyers? The lack of jobs, increasing home prices, tighter lending guidelines, student loan debt, and rising interest rates are the primary culprits. Other than that, buying a home is easy.
Jobs and the first time home buyer. ADP predicted 188,000 jobs were added in June. Business Professor Peter Morici of the University of Maryland said the 188,000 jobs are half of what is needed to impact the unemployment rate, and the quality of jobs being created is not good. Morici says this is a Mc Job market.
If 188,000 jobs are half of what is needed then the 134,000 in May was well less than half needed. Youth unemployment is at nearly 20%, and for college graduates (age 25 and under)the un/underemployment rate is 50%. Guess these youths can’t run out and buy a home.
Now comes the 195,000 jobs for June reported as ‘large gains’ by Obama sycophants at CNBC. Even economist for hire Mark Zandi, the Obama economic apologist, admitted the perpetual getting better with low paying jobs for the 48th straight month in the Obama recovery wasn’t good enough.
Increasing home prices are leaving many on the sidelines according to NAR. In other words first time buyers are being priced out of the market in many locals.
Dodd-Frank’s Consumer Financial Protection Bureau’s charge to make the mortgage process more consumer friendly with 1,099 pages of new regulations, and the Qualified Residential Mortgage Rule has protected first time buyers out of the market.
Not surprising is the graduate with student loan debt greater than what they can earn in a year, or two, or more is disqualified under the new Dodd-Frank rules.
Interest rates rising combined with rising prices disqualify many first time buyers whether college graduates or high school to work in the Mc Job market. The 30 year fixed rate mortgage averaged 4.46% for the week ending June 27, 2013 compared to 3.66% from a year earlier dropping the affordability index by 16%.
So the false market continues. No organic growth. First time home buyers are the canary in the organic mine. Who will buy the first time home seller’s home to start the dominoes falling? Investors?
It gets even better for the first time home buyer on jobs. In a crass political calculation the Imperial President deemed himself the unilateral power to change the statute by extending the employer mandate in Obamacare to 2015 from 2014.
The NFIB said businesses don’t need a temporary reprieve they need a permanent reprieve. Economics Professor Richard Judd of The University of Illinois Springfield said all that was extended was uncertainty.
As long as Obama continues to make political decisions instead of sound economic decisions, the first time home buyer will continue to disappear.
‘First-time home buyers’, by-and-large, means ‘college graduates venturing out on their own for the first time.’ They have to find jobs first. There’s your problem.
Let them live in the free Obamaphones. There’s the ticket.
HA!
Consider a couple in their 50’s, each with 800+ credit scores.
Each just sold their respective prior residence.
New home purchase equals total of of those 2 sales.
LTV is 40%
We were badgerd every step of the way by the lender and the underwriter, right up to the day before closing.
“bring me a rock”...”no, not that rock, a different rock”....
I think there may be another factor at work here.....many of those in the younger demographic who would, in the past, fall into the first time home buyer category, have no desire to OWN their own home and prefer to remain tenants. Too much work, no equity build, and interfers with their perceived freedom.
Also, marriage is tumbling. A home is traditionally a setting in which a married couple envisions raising a family.
If banks were pimping mortgage loans the way they were in 2000-2005, there would be plenty of first time buyers.
Also, many childless people, even if they can afford a house, do not want a house. Many prefer apartment or condo living.
An unspoken factor is that, over the next 30 years, many young people may inherit their parent’s houses, as baby boomers pass away.
Of course, this assumes that the parents didn’t get a reverse mortgage to use up the equity in the property. Also assumes that laws on estates and inheritances don’t change in the years ahead. I have a feeling that Obama doesn’t think that people should inherit property.
Yup! Same happened to us last year. We were both 820+ buying a home less than my annual salary. It still took 5 months and we had to even change lenders. I have 5 previously paid off 5 mortgages and ZERO non-secured debt and investment assets of greater value than our loan. Yet, we still got the BS run around by our commercial bank of more than 20 years. They are no longer our bank.
Ah, yes, my favorite game.
Student loan debt is an obstacle for many, even if they have jobs:
http://www.newsday.com/classifieds/real-estate/student-debt-slows-housing-recovery-blocking-first-time-buyers-from-record-low-mortgage-rates-1.5076132
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