First time home buyers have not been helping the housing recovery. Not because they do not want to buy, it’s that they can’t buy.
According to Fannie Mae, the now young renters (those between ages 18-39) say they’d like to buy, it’s just that lifetime economic realities do not allow them to buy a home.
Thus their absence is one reason why the housing recovery has not been better.
Less-then –perfect credit, lack of savings, and huge student debt load are holding them back. Additionally they are not forming households as quickly as their parents.
The numbers certainly confirm this phenomenon –home ownership rate dropped 64.8% in the first quarter sown from 65.2% in 2013. While that may not seem like a lot, in 2004 the rate was as high as 69.2% in 2004.
The key reasons are: unemployment, low savings, low credit scores, high student debt, and delays in starting a family.
In 2012 1.3 million students had student debt compared to 900,000 in 2004. Credit scores for the group are in the 628 range compared to 735 for baby boomers and 643 for Generation X.
Add new mortgage regulations, set into motion by the Dodd-Frank Act, and require that borrowers have no more than a 43% debt-to-income ratio (with debt encompassing monthly housing costs and debt payments, including those on student loans).