Report: Entry-level home buyers make up biggest share of market ever
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First-time buyers made up a bigger share of the housing market in 2009 than any other year on record, according to a study released this afternoon.
The number of first-time home buyers rose to 47% of all home sales from 41% of transactions in last year’s study, and was the highest on record dating back to 1981, according to the Washington-based National Assn. of Realtors.
Home sales have been fueled in recent months by cheap foreclosure properties. Both investors and first-time buyers have jumped into the market to snap up these heavily discounted digs.
For first-time buyers, one major incentive fueling the spree has been a tax credit extended last week by the Obama administration and expanded to include move-up buyers. The Realtors group lobbied heavily for the legislation. Paul Bishop, vice president of research for the Realtors group, said in a statement that several factors have been at play, including the tax incentives.
Many independent economists, however, contend that the credits are being given to people who would have bought anyway.
Of those first-time buyers, 55% purchased their home with a loan backed by the Federal Housing Administration.
That news comes on a day on which an independent audit of the FHA’s finances shows that its cash reserves have shrunk to a level below its legal limit, meaning that this pillar of the recent housing market upswing might need a taxpayer-funded bailout.
From the Washington Post:
The audit examined the excess cash the agency must set aside to deal with unexpected losses in its flagship home-buying program, which has played a key role in supporting the housing market. As of Sept. 30, those reserves had an estimated value of $3.6 billion, a sharp drop from the $12.9 billion available a year earlier, the audit found. The current total represents 0.53 percent of all outstanding single-family-home loans insured by the FHA, well below the 2 percent portion set by law. This is the first time reserves have fallen under that threshold since 1994.
-- Alejandro Lazo