Who are the new homebuyers?

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Homebuying conditions look great on paper, but a bunch of factors is preventing traditional first-time buyers or those looking to trade up from getting into the game. Consequently, the new buyers are more often investors with cash or cautious buyers of spec homes.

We’re currently enjoying “the best housing affordability conditions in a generation,” according to Ron Phipps, president of National Association of Realtors (NAR). Home prices continue to sink and mortgage rates are below 5 percent, setting up a perfect storm for buyers with good credit. Trouble is, many homeowners can’t sell their existing home because they owe more on the loan than the home is worth. And tighter lending standards mean first-time buyers are having difficulty obtaining financing.

As a result, mortgage activity has been steadily dropping since 2008. Federal Reserve data gathered from 7,900 lenders showed 7.9 million home mortgages — including new home loans and refinance loans — were completed last year, compared with 9 million in 2009 and an all-time high of 21.5 million in 2003. This is despite the fact that 30-year-fixed mortgage rates in the latest Bankrate survey averaged 4.29 percent.

More buyers these days are ignoring lenders and coming to the table with cash (29 percent in both July and August) and the bulk of the all-cash buyers are investors.

Spec homes are also making a comeback, according to CNBC. Up until the housing bubble burst, builders would construct homes on “spec” (short for speculation) with the knowledge that buyers were out there to snap them up before they sat on the market too long. Deep into the housing crisis, builders backed away from that strategy, fearing they’d be left holding the financing if the home failed to sell. Now, buyers who are afraid to sign a contract on a new house without the relative certainty they’ll sell their current home, are waiting to sell and then seeking nearly-completed or completed spec homes to buy. Builders, desperate for any buying trend that gets them working, are cautiously responding by building more spec homes in high-demand areas.

Still, the scarcity of buyers will hurt the housing industry and builders for some time to come. Most homebuyers need mortgages, so until lending standards loosen and the economy strenghthens, the situation isn’t likely to improve anytime soon.

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