Dr. Housing Bubble 04/10/15

[Crewleader]

The broke first time home buyer: 66 percent of first time buyers purchase homes with low down payment mortgages.


There is a reason why new home sales still remain in a slump. New home sales cater to an economy where most family income is rising to support the cost of higher priced homes. In many markets, new homes cater to first time buyers. But the first time home buyer market is mired in problems. In more expensive metro areas you have younger people simply unable to afford rents let alone the cost of a crap shack. In many other parts of the US families are simply dealing with an economy that isn’t seeing across the board wage increases. Low interest rates have to remain to keep the monthly payment static. At least that is what the Fed is hoping for. There was some recent data showing that first time home buyers continue to make up a small portion of all sales. Contrary to some false narrative, many first time home buyers are coming in with low down payments, not suitcases of cash. And for the most part, this is being driven because Americans overall don’t have much in savings and barely enough to cover a dinner at Taco Tuesday with a side order of guacamole if you are being a big spender.

Low down payments and low percentage of all sales

The first point we should look at is that the percent of first time home buyers is still near historical lows. First time home buyers as you would expect come from younger families. Younger Americans came of age during the epic tech bubble and the even more dramatic housing/debt bubble. Across a span of 20 years wages have remained stagnant yet the cost of debt financed items has ballooned (i.e., housing, college tuition, and even glamorous cars). But with housing, much of the growth is dependent on government backed low rate loans.

Take a look at the percentage of first time home buyers:



http://www.doctorhousingbubble.com/broke-first-time-home-buyer-first-time-buyer-down-payment/

[westerebus]

1. Local outlook out my front door...

Boomers are not moving to larger homes and as a result of the last economic shock, are digging in and paying down debt.

The result is the base affordable or starter home market is not opening up as it had in the past. Fearful of not having a job connection available and providing safe haven for adult children and their siblings, the lure of golden years on the beachside condo has past many by. In place and at home debt free is the game plan for many.

Boomers are splitting retirement, while a working spouse remains in the workforce. Or returns to a company as a part time or contract employee. Or combinations of family members go generational in the home of relatives to pool resources.

Single boomers are making room for non relative house sharers to make ends met. Housing demand for smaller one story units has not caught the attention of traditional builders. Multi family units taking up inner suburban land space.

All this depresses the broader housing market which in turn diminishes the economy across many sectors. Construction trades to trash haulers to insurance agents and school funding.

[Crewleader]

2. westerbus

good to see you my friend and as always spot on

[westerebus]

3. Hi. Crewleader.

[Sherman A1]

4. A good set of observations

boomers are a diverse lot and many are experiencing the challenges you describe. Many however, are experiencing differing challenges trying to find the means to retire.

[westerebus]

5. We may be the generation that just keeps going...

until we can't. I work with several, who collect SS and work part time.

Some to stay in touch with the world. Some to keep up with the bills.

Two were wiped out financially despite having planned for retirement. Second mortgages and divorce.

Even people I know who are well off, feel they are not in any position to retire. That surprised me.

We may wind up living in a commune. That wasn't so bad back in my hippie days. Weed farmers. lol