The current landscape is fertile ground for first-time homebuyers. In fact, these novices accounted for nearly one-half of all new and existing home sales in many areas of the country during the first quarter of 2008, according to HouseHunt’s “Current Market Conditions” random survey of its member-agents. Historically, first-time buyers represent only about one-third of all buyers.
First time buyer activity in the first quarter of 2008 was reported up 25% in California – not surprising given widespread home price declines from foreclosures as well as other negative market pressures. Internet tire-kickers looking for homes are somehow turning into real buyers, so it seems the pent-up demand is there. The challenge for local Realtors is to convince sellers sitting on the sidelines of the necessity to price of their homes properly in order to be able to purchase another home — also at a reduced price — and at favorable financing rates.
Many first-time buyers are taking advantage of lower prices and an abundance of properties to choose from as well as the willingness of sellers to negotiate. A challenge, however, is for those first timers to obtain financing.
Although a 10% down payment is now the norm, 5% down-payment loans can be found. Zero-down-payment options are scarce, but if you're working with a conforming loan of $417,000 or less and a credit score of at least 700, you might find one. You will, however pay private mortgage insurance on loans for more than 80% of the purchase price.
Because lenders have become sticklers about making sure that borrowers don't overextend themselves, expect to provide more comprehensive proof of income. Borrowers who are considering adjustable-rate loans will need to qualify for the fully indexed rate.
National housing data suggests that more than $110 billion in adjustable rate mortgages reset in March with $92 billion due to reset in April, $76 billion in May and $75 billion in June before declining steadily until they reach a more normal $17 billion in December. This could translate into a decline in foreclosure activity by fall and sales experiencing a faster clip from that point forward.
Lawrence Yun, chief economist for the National Association of Realtors, is cautiously optimistic the worse is over: “Existing home sales could start to show a sustained increase within a few months, barring additional economic problems. The wider access to affordable credit should increase sales activity, notably this summer as pent-up demand begins to be met.”
Dena Kouremetis is a veteran freelance real estate consumer journalist and California real estate broker. She may be reached by email at REritr@aol.com.
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