Before the 2014 spring selling season, I told housing media experts such as Diana Olick from CNBC and Kathleen Hays from Bloomberg Financial that 2014 had the fewest pre-approval requests (a prime indicator of first time home buyer interest) I had seen in my 15 years in the lending business. I reported on this apparent aberration in the marketplace in an article published back in March of this year:I worked with Bloomberg on a First Time Home buyer article back in March
“First Time Home Buyer, What’s That
In May, I reiterated the observation of very weak first time home buyer activity in an interview with Bloomberg:
From the great Professor Anthony Sanders.
To rehash this old story – for those who somehow missed it, the reasons for this weakness revolve around a mixture of inter-related economic, social and political forces some of which include:
1. Delay in marriage (Dual incomes missing)
2. A lack of a strong paying full-time job with security.
3. Older Americans are unable to retire due to lack of savings – they replace younger workers, who have trouble finding jobs.
4. Having enough for a down payment plus closing cost with taxes impounded is a lot for young aspiring home buyers.
5. Renting isn’t considered a bad option anymore from young Americans.
6. Exotic loans that allow would be homeowners to obtain credit without collateral or income verification are removed from the market.
7. Financially strapped parents are unable to “gift” down payments for first home purchases by their children.
8. Student loan debt impacted household formation from rising and making it more expensive for first time home buyers to buy.
9. Despite the weak first time buyer market, home prices go up in many markets due to the lack of inventory, keeping home ownership even further out of reach.
With all these factors in play, we simply don’t have enough qualified home buyers once you removed the cash buyers, to generate a housing recovery.
To quote an article I wrote in late 2012: A lot of things have changed in America because of our debt blow up, … maybe a generation will wait just a bit longer to buy a home.
“The Young and the Renting”
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