Though homebuyers are gaining confidence, changes are needed to bring
first-time purchasers back to the market, a real estate executive told CNBC on
Wednesday. Richard Smith, CEO of Realogy, the leading franchiser of real estate
brokerages Century 21, Coldwell Banker, ERA, Sotheby's International and
ZipRealty, said two things need to happen to bring the share of first-time
homebuyers back from a near 30-year low. First, fees on loans provided by the Federal
Housing Administration are extraordinarily high, Smith said. FHA
loans are considered the traditional form of purchasing a home for
a first-time homebuyer, so the high fees are an obvious headwind, he said. Second, underwriting methodology, not to be
confused with underwriting standards, is a necessary change to
catalyze first-time homebuyers, Smith said.
Banks have a very difficult time adjusting to the new environment,
which holds them accountable even for technical defaults, so the putback risk
is very high. Lenders know it and they've been reluctant to lend to first-time
buyers for that reason, Smith said.
The first-time buyer, traditionally, is a higher-risk buyer,
he said. But with some, I think, basic considerate underwriting we can
get the first-time homebuyer back.
Earlier this week, purchases by first-time homebuyers fell to the lowest
level in nearly three decades—just 33 percent this year, down from 38 percent a
year ago, according to an annual survey of homebuyers by the National
Association of Realtors. The long-term average, dating back to 1981, shows that
4 out of 10 purchases are by first-time buyers. —CNBC's Diana Olick contributed to this report.
Author:Judy Collins Phone: 609-492-2090 Dated: November 22nd 2014 Views: 346 About Judy: ...
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