Real Estate News 2/11/19

 A new survey from Zillow and Pulsenomics LLC said the homeownership rate--led by first-time buyers--will climb above the historic norm within five years, despite rising interest rates. The survey of more than 100 real estate economists reported a majority (58 percent) of said home values today were somewhat or much more sensitive to changing rates than in years past. Only 15 percent of panelists said home values today are somewhat or much less sensitive to interest rates. "Rising rates take a big chunk out of buying power," said Zillow Senior Economist Aaron Terrazas. "If rates grow to 5.5 percent, a typical U.S. household looking to spend no more than 30 percent of its income on housing would have to slash its home-buying budget by nearly $35,000 to keep the payment from rising. The result means buyers on strict budgets have a smaller share of potential homes to consider, and others might stretch their budgets dangerously thin." Despite that uncertainty, panelists largely expect first-time buyer activity to increase--and investor activity to decrease--this year, with the homeownership rate climbing above its long-term average in the next five years. Nearly half the panelists predicted first-time buyer activity would increase somewhat or substantially, with less than a quarter predicting a decrease. The rest said it would remain about the same. Repeat buyer activity, by comparison, was a prediction stalemate, with nearly half saying it would not change much, and an equal 23 percent on either side--predicting it would increase somewhat or decrease somewhat. Source: Zillow

Genworth, Richmond, Va., said despite a moderate but broad slowdown in the housing market in the third quarter, the first-time home buyer market proved resilient compared to the repeat buyer market. "The biggest surprise in this report is that despite the slowdown in the housing market, the number of first-time homebuyers increased from a year ago," wrote Genworth Chief Economist Tian Liu in the company's quarterly First-Time Homebuyer Market Report. "This is a reminder that first-time homebuyers differ from other buyer groups in terms of why they buy." The report noted in the third quarter, the housing market experienced a moderate but broad slowdown. The slowdown resulted in lower sales of new and existing homes, a slight increase in housing inventory and supply, lower growth in new single-family home construction and slower home price growth. Despite this, the report said, first-time homebuyers continued to be very active in the housing market. "Many have spent years renting, and are now reaching the time in their life where renting no longer makes sense," Liu said. "This helps the first-time homebuyer market stay strong in the face of falling affordability." The report also noted the relative strength in the first-time homebuyer market has been beneficial to the private mortgage insurance industry--the industry saw a 17% year-over-year increase in the number of first-time homebuyers. Low down payment conventional loans were the largest source of credit for first-time homebuyers this quarter. However, the report said the housing slowdown has had a bigger impact on repeat homebuyers, resulting in lower sales to those homebuyers. The part of the housing market that primarily serves repeat homebuyers has also been hit hard. For example, the home building industry saw sales fall in every price point above $300,000 this quarter. Source: Mortgage Bankers Association

What is the difference between first-time buyers who bought a home and those who didn't? According to an analysis by, it could well be $30,000—the median income difference between those first-time buyers who could afford a home and those who couldn't. The analysis said that the typical first-time buyer earned more than the median household income that helped them towards affording a home. The analysis revealed that the median income for a first-time buyer is $72,500, compared with the national median household income of $60,700. The difference in income for first-time buyers is more pronounced when compared with their peers who didn't buy, who have a median income of $42,500. The analysis found that while most buyers relied on savings, as well as proceeds from the sale of a home to finance the down payment on a new property, first-time buyers didn't have the same resources. This is where a higher income came into play to help them save for a down payment. Looking at the down payment that first-time buyers could afford, the analysis revealed that this group of homebuyers usually put down slightly smaller down payments. The median down payment for first-time buyers according to Zillow was 14.5 percent of a home price compared to the traditional 20 percent down. Fifty-eight percent of repeat buyers, on the other hand, put down at least 20 percent down. With this smaller down payment, the analysis indicated, first-time buyers, earning a median income could afford to buy a $338,000 home, meaning they could buy about 68 percent of available homes. Source: The MReport 

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