Realtors report tight credit keeping buyers on sidelines

According to the ARA, recently proposed legislation and reforms to the secondary mortgage market could put the 30-year xed-rate mortgage at risk and make it unavailable to many.”

A new survey released by the National Association of Realtors provides evidence that restrictive mortgage-lending standards have prevented some buyers from becoming homeowners, specifically singles and first-time buyers. According to the NAR’s 2013 Profile of Home Buyers and Sellers, the overall market share of single buyers has declined in recent years; the share of first-time buyers has also slipped since last year.

Overall market share of single buyers declined from 32 percent in 2010 to 25 percent in 2012 and 2013. During the past year, firsttime buyers slipped from a 39 percent to a 38 percent market share.

Fourteen percent of all survey respondents were multi-generational households, including adult children, parents and/ or grandparents. The multi-generational question was added for the first time this year after the trend was identified repeatedly by Realtor association members. NAR chief economist Lawrence Yun said this is just another manifestation of the difficulty in obtaining a mortgage, in addition to slow growth in the job market.

“The housing market is recovering, but it’s still plagued by unnecessarily restrictive mortgage lending standards,” said Bill Olson, 2013 president of the Arkansas Realtors Association.

“Many qualified buyers are being squeezed out of the market due to their inability to get a loan,” Olson said. “The current lending environment tends to favor dual-income households, who are more likely to have higher credit scores. Single buyers have been especially suppressed in the past few years.”

According to the survey, the median age of first-time buyers was 31 and the median income of those was $67,400. The typical firsttime buyer purchased a 1,670-square-foot home costing $170,000. Their median down payment was 5 percent, and 95 percent of entry-level buyers chose a fixed-rate mortgage.

“Fixed-rate mortgages, particularly the 30year fixed rate, have been extremely popular in recent years, most notably among first-time buyers,” Olson said. “This is because the payments are predictable and the fixed interest rate makes homeownership viable for many young buyers. First-time buyers also tend to feel more protected in a fixed-rate mortgage than in other mortgage types.”

However, according to the ARA, recently proposed legislation and reforms to the secondary mortgage market could put the 30year fixed-rate mortgage at risk and make it unavailable to many. Olson says that without the 30-year fixedrate mortgage many first-time buyers would be in jeopardy. “Consumers need access to safe and sound financing, as well as low down payment options,” Olson said. “This allows qualified buyers to enter the market and will also ensure a sounder housing recovery.”

Realtors are working hard with key legislators and regulators to address this issue and make sure that those safe and affordable loan products remain available to today’s homebuyers.

Other findings from the survey include that 60 percent of first-time buyers cited a desire to own a home as the primary reason for purchasing; eight out of 10 recent homebuyers said their home is a good investment; and 44 percent believe it’s a better investment than stocks. In addition, 91 percent said they were satisfied with the homebuying process.

House to House is distributed by the Arkansas Realtors Association. For more information about homeownership in Arkansas, visit www.ArkansasRealtors.com.