Number of First Time Buyers Decimated
It should come as no surprise that when the mortgage industry began it’s meltdown, first time buyers would suffer. As the industry imploded, 100% purchase mortgages became harder and harder to find.
Market Watch reports today that 45% of first time buyers financed 100% of their home purchases. It goes on to say that the median down payment for first time buyers is a mere 2% of the purchase price.
So without liberal 100% purchase financing readily available, there are no first time buyers to drive the real estate market. This will undoubtedly have an affect on the over all real estate market, not just the entry level market.
Fewer first-time buyers can have an effect on an entire housing market, when homeowners looking to trade up to a more expensive home have a harder time finding buyers for their starter homes.
Yes there is still 100% financing available for purchases. However, it is only being extended to the strongest of borrowers. People who can prove their income, have a strong credit score and are actually able to save a few bucks.
Contrast this to the 100% financing of yesteryear, which only required a 580 (”B-” credit) credit score, no proof of income or the ability to save money. Based on the article’s statistics, there is no longer a first time buyer market.
“First-time home buyers will be much lower for next year’s survey, given the credit crunch,” said Lawrence Yun
Arguably, people who cannot balance a checkbook (many in this market don’t even have one), cannot save a month or two’s income and don’t have a history of paying bills on time should not be home owners. Borrowers that are this weak will undoubtedly have a difficult time maintaining their obligations. This is what we are seeing today and this is a contributing factor to the mortgage meltdown.
So even though our government, in it’s infinite wisdom, seeks home ownership for everyone, the natural forces of economics and finance dictate otherwise. Now that the chickens are coming home to roost in the mortgage industry, the hypocrites in government are targeting the industry for delivering exactly what it sought.
To make matters worse, government actions to deal with the mortgage meltdown, will only make products that foster a strong entry level market even more scarce and expensive. In fact, their actions will kill and shrink the mortgage industry, making consumer choices scarce and more expensive.
Government initiatives of this sort have the potential of leading this country, it’s economy and it’s people into a 1930’s style depression.