I read an interesting article published by Campbell/Inside Mortgage Finance/Housing Pulse, on how first time homebuyers are not riding the wave of this recovering market. The Housing Pulse is based on a national survey of more than 2,500 real estate agents each month and provides up to date intelligence on home sales and mortgage use patterns throughout the United States. As a panel member, I participate in these survey's on a monthly basis.
In November's publication, the results showed the first time homebuyer's share of home purchases fell to 34.7 percent in October. That was not only down from the 37.1 percent share seen as recently as June, but also the lowest first time homebuyer share ever recorded in this survey.
This decline comes at the same time that purchases of non-distressed properties has risen significantly this year. Non-distressed properties share of home purchases climbed 64 percent in October. That was up 55.7 percent back in February and the highest non-distressed share recorded by the Housing Pulse.
First time homebuyers are the only group tracked by the Housing Pulse that have not seen their share of non-distressed ho0me purchase rise over the past five months. Current homeowners have seen the biggest jump in purchases of non-distressed properties with their share rising from 50 percent in June to 54 percent in October. Even investors saw their share of non-distressed property purchases inch higher from 11.3 percent to 12.2 percent over the past five months.
A key factor in the first time homebuyers purchase is the availability of financing. 50 percent use FHA financing, but FHA insurance premiums are increasing and underwriting is becoming more strict. Private mortgage insurance has started to fill the gap, but the long term status of private mortgage insurance is in question pending the publication of the Qualified Residential Mortgage regulation.
In a further blow to first time homebuyers, the FHA announced last month that it plans to raise mortgage insurance premiums by an additional 10 basis points in early 2013 as an effort to improve the financial condition of the cash-strapped FHA mortgage insurance fund.