The entrance of first-time buyers into the housing market has long been written off due to stagnant wages, tight credit and what appeared to be a renting preference. As existing U.S. home sales surged to a 5-1/2-year high in May, data showed first-time homebuyers have not been shut out of the housing market.
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First-time buyers represented 32 percent of all sales in May, up from 30 percent in April and 27 percent in 2014. The May amount of first-time buyers was at its largest share since September 2012, though the share remains below the 40-45 percent mark economists say is required for a prosperous housing market.
Overall, existing home sales were up 9.2 percent year-over-year, but inventory remains tight. Forty-five percent of homes sold in May were on the market for less than a month, according to the National Association of Realtors (NAR). Tight inventory leads to higher selling points, with May's existing home sale prices increasing nearly 8 percent from May 2014.
With tight inventory, increasing home prices, sky-rocketing rents, and a pending federal funds rate hike, experts are predicting that even more first-time homebuyers are about to enter the housing market yet this summer.
If you're on the fence about making your first home purchase, there are several things you should know about the summer housing market:
- Median home prices have climbed 7.9 percent over the past 12 months, according to the National Association of Realtors.
- Mortgage rates are still near record lows, but the pending federal funds rate hike, which economists are expecting to occur in fall 2015, will influence an increase in rates.
- Tight housing markets can lead to bidding wars, above-market offers and an overall seller's market. First-time homebuyers should gain a loan commitment for a significant head start in a multiple-offer purchase situation.
- Low down payment programs, such as FHA, USDA and Fannie Mae's MyCommunity Mortgage, are enabling homebuyers, especially first-timers, to enter the housing market.
If you're a first-time homebuyer or looking for more information about the home financing and purchasing process, download our free Mortgage 101 Handbook or contact one of our mortgage bankers to begin the loan process.