Yet the most likely first-time homeowners, especially young professionals and couples starting families, won't buy these days. Or they can't. Or they already did, during the housing boom. And their absence helps explain why the housing industry is still depressed.
The obstacles range from higher down payments to heavy debt from credit cards and student loans. But even many of those who could afford to buy no longer see it as a wise investment. Prices have sunk 15 percent in three years.
"I've looked for a home, but the places we can afford with the money we have are not that great," said Seth Herter, 23, a store manager in suburban St. Louis. "It also doesn't seem smart anymore to buy with prices falling. Buying a home just doesn't make sense to us."
Corpus Christi, like many Texas housing markets, has fared well compared with the rest of the country's slump.
The local housing market cratered in 2009, said Gary Doran, president and CEO of the Corpus Christi Association of Realtors. Federal tax incentives helped lift the market in 2010. In 2011, the market stabilized on its own. Inventory — the number of months it takes to sell every listed home — is at 9.1 months, down from about 11 months earlier this year, he said.
The proportion of U.S. households that own homes is at 65.1 percent, its lowest point since 1996, the Census Bureau said. That marks a shift after nearly two decades in which homeownership grew before peaking at 70 percent during the housing boom.
The housing bubble lured so many young buyers that it reduced the pool of potential first-timers to below-normal levels. That's contributed to the decline in new buyers in recent years.
In 2005, at the height of the boom, about 2.8 million first-timers bought homes, according to the National Association of Realtors. By contrast, for each of the four years preceding the boom, the number of first-timers averaged fewer than 2 million.
Still, the bigger factors are the struggling economy, shaky job security, tougher credit rules and lack of cash to put down, said Dan McCue, research manager at Harvard University's Joint Center for Housing Studies. The unemployment rate among typical first-timers, those ages 25 to 34, is 9.8 percent, compared with 9 percent for all adults.
"The obstacles facing first-time buyers are big, and it's changing the way they look at homeownership," McCue said. "It's no longer the American dream for the younger generation."
First-timers usually account for up to half of all sales. Over the past year, they've accounted for only about a third.
A big reason is tougher lending standards.
Lenders are demanding more money up front. In 2002, the median down payment for a single-family home in nine major U.S. cities was 4 percent, according to real estate website Zillow.com. Today, it's 22 percent.
And one-third of households have credit scores too low to qualify for a mortgage. The median required credit score from FICO Inc., the industry leader in credit ratings, has risen from 720 in 2007, when the market went bust, to 760 today.
Despite the restrictions of higher credit scores and larger down payments, people still are securing mortgages, Doran said.
Market activity is up in many areas including the northwestern part of the region, where homebuilding has picked up to address housing needs caused by the Eagle Ford Shale boom, Doran said.
Getting more first-timers who may be ready to enter the housing market will take removing economic uncertainties such as job security, Doran said.
"I think it's all based on jobs," Doran said. "I think people are a little gun shy right now; they're afraid to do anything."
Homes in many places are the most affordable in a generation. In the past year, the national median sale price has sunk 3.5 percent. Half the homes listed in the Tampa Bay area are priced below $100,000.
The average mortgage rate for a 30-year fixed loan is 4 percent, barely above an all-time low. Five years ago, it was near 6.5 percent. In 2000, it exceeded 8 percent.
When the economy eventually strengthens, the housing market will, too. More people will be hired. Confidence will rise. Down payments won't be so hard to produce.
The question is whether first-time buyers will then start flowing into the housing market. That will depend mainly on whether they think prices will rise, said Mark Vitner, senior U.S. economist at Wells Fargo.
"It's a guessing game as to when things will turn around," Vitner said. "But until they do, you won't see young people buying homes."
Source www.caller.com/
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