How do you reconcile these recent reports on housing? The National Association of Realtors (NAR) reported a surge in pending sale contracts in May to the highest level since 2006. Simultaneously Bloomberg reported that mortgage applications fell to their lowest level in nineteen months.
Cash must be king? According to NAR 33% of existing home sales in May were cash. What portion of those cash sales do you think were from first time home buyers? My guess would be somewhere between zero and one percent.
The first time home buyer has always been the most important buyer in the market, at least to main street American families. The first time home buyer starts the dominoes falling for larger purchases.
The Catch22 in housing: I won’t buy another home until my home is sold, but I won’t sell my home until I know where I’m moving. Life just isn’t fair sometimes, but without the first time home buyer in numbers many sellers won’t need worry about where they will be moving.
First time home buyers accounted for only 28% of sales in May, down from 34% a year prior, and from the 40% norm. That’s huge. This means there won’t be as many dominoes falling this summer.
Why is there a dwindling number of first time home buyers? The lack of jobs, increasing home prices, tighter lending guidelines, student loan debt, and rising interest rates are the primary culprits. Other than that, buying a home is easy.
Jobs and the first time home buyer. ADP predicted 188,000 jobs were added in June. Business Professor Peter Morici of the University of Maryland said the 188,000 jobs are half of what is needed to impact the unemployment rate, and the quality of jobs being created is not good. Morici says this is a Mc Job market.
If 188,000 jobs are half of what is needed then the 134,000 in May was well less than half needed. Youth unemployment is at nearly 20%, and for college graduates (age 25 and under)the un/underemployment rate is 50%. Guess these youths can’t run out and buy a home.
Now comes the 195,000 jobs for June reported as ‘large gains’ by Obama sycophants at CNBC. Even economist for hire Mark Zandi, the Obama economic apologist, admitted the perpetual getting better with low paying jobs for the 48th straight month in the Obama recovery wasn’t good enough.
Increasing home prices are leaving many on the sidelines according to NAR. In other words first time buyers are being priced out of the market in many locals.
Dodd-Frank’s Consumer Financial Protection Bureau’s charge to make the mortgage process more consumer friendly with 1,099 pages of new regulations, and the Qualified Residential Mortgage Rule has protected first time buyers out of the market.
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