Could 2015 be the year when first-time homebuyers start thinking again about purchasing their first house?
Agents at the real estate brokerage Redfin report seeing some positive signs. In the first three weeks of January, the RSVPs to the company’s home-buying classes were up 27 percent, compared to the same period last year.
Also, in the week of January 12th, 57 percent of Redfin home tours were taken by potential first-time buyers. That’s up from 31 percent the week before and from 48 percent during the same week in 2104.
Certainly many first-time homebuyers (most of whom are millennials) are in better financial shape than they were a year ago. The job market improved significantly in 2014, with three million new jobs created (700,000 more than the previous year), and employment among those between the ages of 25 and 34 has gone up.
Yet many millennials are still struggling to make ends meet, with large student debt loads hanging over their heads. Flat income growth has also been a problem, as has fierce competition for homes in the entry-level price range. This group is also more likely to remain single longer – which potentially reduces their purchasing power.
Still, many admit to feeling more financially stable than they did a year ago, a report released Monday by Bankrate said. “Millennials have the highest instance of all age groups of noting improved conditions,” the company noted in a release.
Regulators pushed hard last year to pass measures that make it easier to obtain a mortgage, especially for young first-time buyers. Down payment requirements for first-time buyers were lowered from 5 percent to 3 percent – with the caveat that loans acquired through Fannie Mae and Freddie Mac require the borrower to take part in an education program. There are additional requirements as well, including having private mortgage insurance.
The White House also said at the beginning of 2015 that it plans to reduce government mortgage insurance premiums to make homeownership more affordable for low-income Americans.
Interest rates, of course, continue to be low. The rate on a 30-year fixed-rate mortgage has been hovering between 3.58 percent and 3.83 percent, which is near 20-month lows, Zillow Mortgage Rate Ticker reports. Even if the Federal Reserve starts hiking rates later this year, experts say the impact on mortgage rates would be slow and gradual.
Homebuilders are also making first-time buyers a priority: To cater to this group, builders are constructing slightly smaller homes in 2015, helping the affordability issue at least a little for newbie buyers.
Top Reads from The Fiscal Times: