The National Association of Realtors (NAR) is reporting that many first time home buyers are sitting on the sidelines when it comes to purchasing a home.
In February, 34% of re-sale homes were purchased by first time home buyers. In a “healthy” market that figure would more likely be 40% – 45% of purchases.
One major obstacle for first time home buyers are the now higher credit standards for government backed mortgages. Five years ago loans backed by Freddie Mac had an average credit score of 720. Today, the average credit score is up to 758.
Many lenders are also requiring higher down-payment which is keeping first time home buyers at bay.
Competition is also playing a role. In February, cash buyers accounted for 33% of existing home sales. Cash buyers are more attractive to sellers and they usually are able to out bid conventional mortgage buyers.