NAR: Tight Credit Barring Singles, First-Timers From Homeownership

Tuesday, 05 Nov 2013 02:09 PM

By Michelle Smith

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“Unnecessarily restrictive” lending practices have locked many potential single and first-time buyers out of the housing market, says a survey from the National Association of Realtors.

Optimism has grown about a housing recovery. But the market would have been much weaker without investors, who often purchase with cash, said Lawrence Yun, NAR chief economist, in a press release.

“Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores,” he said.

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

According to NAR data, in 2010, single buyers accounted for 32 percent of the housing market. Up to that point, their market share was stable, only varying by 1 or 2 percentage points.

But in 2012 and 2013, single buyers' market share was sharply lower, only representing 25 percent of purchases.

Since 1981, first-time buyers have been responsible for four out of every 10 home purchases, according to NAR. This year they accounted for 38 percent of the market share, down from 39 percent in 2012.

“The share of first-time buyers appears to be only modestly below normal, but we have to keep in mind that investors have been more active in recent years, and they’re not included in these [survey] results,” Yun said.

CNBC focused on NAR's monthly data, which include all types of home buyers, including investors. A report shows first-time home buyers only bought 28 percent of the homes sold in September.

That credit conditions seem to be squeezing two key groups of consumers out of the market is a cause for concern. As Yun explains, “Historically, first-time buyers are instrumental in housing recoveries because they help existing homeowners sell and make a trade.”

Homeowners are reportedly feeling the pinch of current lending standards, as there are fewer buyers on the scene, says CNBC.

Redfin, a real estate sales and data company, reported that in a recent survey, 43 percent of sellers claimed to be disappointed in the level of buyer interest in their homes.

In the third quarter, 48 percent of Redfin survey participants felt it was a "good" time to sell, but that number has fallen to 34 percent, said CNBC. Sellers' top concern: “general economic conditions.”

With fewer contracts being signed, CNBC says some analysts are reducing their expectations for home sales this year. Capital Economics also reduced its outlook for 2014, citing a lower starting point and new banking regulations, which some say could worsen conditions for single and first-time home buyers.

“Given that mortgage interest rates are expected to gradually rise, we need greater access to credit for a sounder housing recovery,” Yun said in the NAR press release.

“Affordability conditions remain favorable in much of the country, but consumers need access to safe and sound financing, particularly the 30-year fixed-rate mortgage, and with low down payment options for first-time buyers,” he added.

Editor’s Note: New Video Exposes a ‘Great Retirement Heist’

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Bankrate: 5 Trends for Housing This Fall

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