Housing Market Sidelines Many First-Time Buyers

Affordability constraints in the real-estate market are making it harder for first-time buyers.

According to Market Watch, there’s been a rebound in home-buying demand in recent weeks, as evidenced by mortgage application data. But first-time buyers aren’t behind the surge.

The latest data from the Mortgage Bankers Association, for the week ending Nov. 26, showed that overall mortgage applications dropped 7.2% on a weekly basis. But loan applications for mortgages meant to purchase homes increased by 5.1% week-over-week, building on the previous week’s 4.7% uptick.

Overall, in November, mortgage applications for loans intended for purchasing homes increased by 7% in November, according to an analysis from Joshua Shapiro, chief U.S. economist at MFR Inc. That’s compared with a 1% decline in October and an 8% gain in September. But when diving deeper into the data, it’s clear that not all buyers are flocking back to the market in similar numbers.

“As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity, while the share of first-time buyer activity remains depressed,” Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association, said in the trade group’s latest report.

Evidence for this can be seen in a number of data points, including the share of applications for mortgages backed by the Federal Housing Administration. FHA loans can be a useful proxy for first-time buyer demand, since they require smaller down payments and lower minimum credit scores than loans backed by Fannie Mae FNMA, -3.40% and Freddie Mac FMCC, -6.56%.

In the most recent week, FHA loans made up only 9.4% of overall purchase loan applications, down from 10.2% during the same week in 2020.

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