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First-Time Homebuyers ‘Completely Shut Out’?

Redfin Chief Economist Daryl Fairweather appeared on CNBC’s The Exchange and noted fewer risky mortgages by Fannie Mae and Freddie Mac could keep first-time buyers out of the market. 

“During the downturn, Fannie and Freddie wanted to sustain the housing market, keep it strong, and make sure there is enough demand out there’ Fairweather said. “They don’t really need to do that anymore because there are more buyers than there are sellers right now.

“If anything, we may enter a scenario where home prices accelerate too quickly. So pumping the brakes a bit may be what the housing market needs.” 

CNBC reported that 60% of homebuyers put less than 6% down when buying a home. However, Fairweather said home prices have accelerated so fast and many first-time buyers can’t put down 20%, with many buyers being “completely shut out” of the housing market. 

The latest CoreLogic Home Price Index said home prices rose 3.5% and are projected to increase by 5.4% over the next year. The increase in the October 2019 HPI gain, however, was down from October 2018’s rise of 5.2%. 

October 2019’s increase in the HPI was higher than September’s 3.3%. CoreLogic states home prices have been gradually rising year-over-year between 3.2% and 3.5% over the past six months.

Home prices have increased annually on a monthly basis for more than seven years since 2012 and have gained 62.5% since bottoming out in March 2011. The overall HPI in October 2019 was 9.4% than its pre-crisis peak in April 2006.

While a survey from Genworth Mortgage Insurance reported first-time buyers purchased 591,000 homes in Q3 2019—a year-over-year increase of 1%—it added that just 117,000 first-time buyers put down more than 20%. 

Genworth said 88% of purchase loans in 2018 with a 3-5% down payment went to first-time buyers—higher than the 53% who put 5-10% down and the 27% who more than 20% down. 

The use of conventional mortgages with low down payments, used by private mortgage insurance, have grown from 346,000 to 684,000 first-time buyers from 2014-2018.

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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