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The mortgage application data shows that in recent weeks there’s been a rebound in home-buying demand. But first-time buyers aren’t behind the surge.
The latest data from the Mortgage Bankers Association shows that last week, the overall mortgage applications dipped 7.2%. But loan applications for purchase mortgages rose 4.7% from the previous week to 5.1%.
According to an analysis by chief U.S. economist at MFR Inc., Joshua Shapiro, in November, the overall mortgage applications for purchasing homes increased by 7%, which is a 1% decline in October and an 8% rise in September.
But when the data is studied further, it clearly shows that all buyers are not rushing back to the market.
In the trade group’s latest report the associate vice president of economic and industry forecasting for the Mortgage Bankers Association, Joel Kan, said, that with the home price rising continuously, buyers of newer, pricier homes are dominating the purchase activity, but first-time buyer activity is low.
It is visible in the share of applications for mortgages backed by the Federal Housing Administration.
He suggests that FHA loans can be useful for first-time buyer demand because they require smaller down payments and lower minimum credit scores compared to the loans backed by Fannie Mae and Freddie Mac.
Of the overall purchase loan applications, FHA loans made up only 9.4% which is lower than 10.2% the same time a year back.
according to recent data from the National Association of Realtors, the number of first-time buyers increased last year from 31% to 34%. Even with the increase, this number remained much below the historical norm of 40%.
George Ratiu, manager of economic research at Realtor.com. said, according to their data earlier this year the property market was hot because the pandemic pushed demand for homes and experienced low inventory, due to underbuilding.
As of June 2021, there was a shortage of close to 5.2 million homes. Even when the mortgage rates were low, many first-time buyers could not afford the homes.
If the inventory improves and if more homeowners list their homes for sale then first-time buyers’ might stand a chance of owning a home.
Between 2020 and this year more than 1 in 4 first-time buyers used a gift or loan from friends or family for their down payment says a data from the National Association of Realtors.
Reference Source: Market Watch
