Zero-Down Home Loan Program

A new effort is underway to raise the low rate of home ownership among under served groups of home buyers. The Neighborhood Assistance Corp. of America is hosting several events across the country, helping borrowers with low credit scores to apply for 15- or 30-year mortgages with cheaper interest rates.

NACA CEO Bruce Marks told CNBC. “There have been zero foreclosures among the loans that we’ve originated in the past six years.”

Borrowers are required to go through an education session about the program, as well as counseling for budget planning to make sure they can afford a mortgage payment. They also must still submit all necessary documents, such as income statements amd phone bills. The program serves only those who are buying a primary residence, not an investment property.

Is the Entry-Level Home Vanishing?

For-sale inventories may be at nearly a two-year high, but first-time home buyers are still finding themselves shut out of the housing market, being outbid and still not finding enough choices in their price range, Reuters reports.

A decline among inventories for entry-level homes has worsened during the past year as discount foreclosures have faded and investors have continued to buy up low-priced homes and turn them into rentals through all-cash deals. Also hampering the inventory picture, lower-priced properties are more likely to have home owners with underwater mortgages, preventing them from moving on and putting their homes on the market, Reuters reports.

“It’s bad news for people looking for a starter home that all the choices are disappearing,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “People shouldn’t expect inventory to show up on the low end. It’s not available.”

The number of homes for sale below $198,000, considered the bottom third of the market, dropped 17 percent in June compared to a year earlier, according to an analysis by the real estate brokerage Redfin, which tracked 31 of the largest U.S. metro markets. On the other hand, inventories rose 3 percent in the middle of the market and soared 15 percent at the top, according to the analysis.

First-time home buyers are often drawn to the lower-priced homes, and their dwindling numbers in recent years have reflected some of the struggles in finding an affordable home. First-time home buyers accounted for 28 percent of all sales of previously owned homes in June, which is down from a historical average of about 40 percent, according to NAR research.

Source: “First-Time Buyers Shut Out of Expanding U.S. Home Supply,” Bloomberg News Online (Aug. 12, 2014)

 

 

The Return of the First-Time Home Buyer?

Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005.

As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who are now looking for a household of their own that who were previously living with their parents.

A recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade.

First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. For existing-home sales, first-time buyers’ share is less than one-third of all buyers, at 27 percent in May, according to the National Association of REALTORS®.

The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been a fraction of that, about 500,000 to 700,000 a year.

“We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.”

Source: “First-Time Buyers and New-Home Demand: Reverting to Normal,” Builder (July 10, 2014)