In a recent article Bloomberg financial asked me to comment on the scarcity of first time home buyers in the housing market.
The lack of first time home buyers is not a new phenomenon. This group of mortgage buyers has been underrepresented in the market for years, and you don’t have to read tea leaves to figure out why:
– Median income growth has been very weak
– Majority of the jobs recovered in this cycle have been low wage paying jobs going to people 50 and over
– Lack of liquid assets for a down payment and closing cost even for a 3.5% down payment loan is an issue
– Parabolic rise in student loan debt since 2007
– Living at home is financially more beneficial in this economy for some
– Renting as an option has an appeal for those who aren’t settled economically or not married with kids.
– Base salaries for college grads in some sectors isn’t high enough to obtain mortgage debt
The bottom line is that unless we see income growth, more younger Americans working and more of those younger Americans with better base salaries, first time home buyers will continue to be shut out of the market and this will affect the overall housing recovery.
Logan Mohtashami is a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1988. Logan is also a financial contributor for Benzinga.com and contributor for Businessinsider.com