The combination of low home prices and mortgage rates makes it a great time to buy a home, but one critical segment of homebuyers is not biting.
The number of first-time homebuyers, normally accounting for 40 percent of the purchasing market, has dropped, according to the National Association of Realtors. In July, first-time buyers made up 34 percent of the market.
This particular segment of homebuyers is important because they are not selling another house in order to buy, which is especially important in reviving a sluggish housing market.
First-time homebuyers are faced with stricter lending standards and a 10 percent down payment requirement in most circumstances, making it more difficult for them to come up with the financing. Unemployment among younger potential buyers has also been higher than the national average.
In 2009 and 2010, when the government sponsored the first-time homebuyer tax credit of $8,000, new buyers accounted for almost half of the homes sold. According to the National Association of Realtors, first-time homebuyers will return if the economy picks up and more of the lower-priced foreclosed and distressed properties go on the market.
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