Changes Needed To Spur First Time Home Buyers

Dated: November 22 2014

Views: 1938

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.
Blog author image

Michael Krivacs

I grew up in Beach Haven on Long Beach Island and graduated from The American University with a BS in Business Administration. While in college I met my wife Holly. After school I worked as a Wage ....

Latest Blog Posts

Want To See The Current Long Beach Island Real Estate Market Trends

Want To See The Current Long Beach Island Real Estate Market Trends?Here are the latest trends in the Long Beach Island Housing Market -->The Market Gauges below provide a ton of info about the

Read More

Little Deli For Big Appetites

  If you're  looking for an amazing breakfast sandwich, fresh bagels,  or an oversized mouth watering sub, look no further than Ocean Acres own Lighthouse Deli of.&

Read More

The Hidden Perks Of Great Credit

Everybody knows it’s important to keep your credit in good shape. Not only is a healthy credit score a good financial practice, but it’s also a way to save money and increase your housing

Read More

My 3 Favorite Long Beach Island Rentals Of The Week

MY 3 FAVORITE LONG BEACH ISLAND RENTALS OF THE WEEKIt's time to find that perfect vacation rental for your #LBI2021Vacation on beautiful Long Beach Island!Planning to visit in the

Read More