HOUSING RECOVERY PRICING OUT FIRST TIME HOMEBUYERS
First-time homebuyers are being squeezed out of the housing market recovery due to a sharp rise in home prices in some markets, a recent jump in mortgage rates, tighter lending practices, and competition from investors picking up lower-price property for cash, reports The Wall Street Journal.
First-time homebuyers are more likely to be unemployed, underemployed, or have an unemployed spouse, to have lingering student debt, a less-established credit record and weaker credit scores, the WSJ added.
Between January and June, the median credit score for first-time buyers was 720, below the 750 for repeat buyers, according to information collected for the National Association of Realtors’ Confidence Index.
At the same time, the paper adds, no-money-down mortgages and other products that were popular before the mortgage crisis have largely disappeared.
And lenders have become much more cautious, scrutinizing appraisals, incomes, and the sources of borrowers’ down payment funds to guard against potential legal liability should mortgages default, the paper said.
Add all that to the recent jump in mortgage rates, and the fact first-time buyers are competing for lower-priced properties with investors who often pay with cash, and you have a recipe for first-time homebuyers to be pushed out of the market, the WSJ said.