With average salaries remaining stagnant and stringent mortgage requirements still in place, rising home prices are making it difficult for first-time homebuyers to make a purchase, says Joe Moshé, the owner and Broker of Charles Rutenberg Realty, Inc.
In New York State, 69% of loans administered by Freddie Mac, Fannie Mae and the Federal Housing Administration went to first-time buyers in 2009 — the peak of borrowing for first-time buyers in the state and above the national average, which also peaked at 63%. However, over the past few years, that figure has steadily declined. Last year, the share of government-backed loans given to first-time buyers was 65%; despite the decrease, it was higher than the national average of 56%.
Further, the Mortgage Bankers Association’s seasonally unadjusted Purchase Index — a measure of mortgage loan application volume — dropped 2% on the week ending August 15 from the previous week and was down 11% from the same week last year.
“Although there is a steady decline in mortgage rates, fewer people are coming off the fence to make that big-ticket purchase for the first time,” Mr. Moshé says. “Although more than half of the borrowers in New York are first-time buyers, they may be in the minority by the end of the year if home prices keep going up.”
Mr. Moshé says the decline in first-time purchases can be attributed to the lack of affordability. Multiple Listing Services of Long Island reported last month that median home prices went up 1.4% from $379,000 in June to $384,150 in July. That may be unaffordable for Long Islanders who, according to data from SimplyHired.com, earn an average of $53,000 per year.
With the current mortgage rate from Freddie Mac at 4.17% and calculating the information through Bankrate.com, assuming the borrower can make a 20% down payment, the average monthly mortgage payment comes out to $1,490.32. That means the borrower would have to use 33.7% of his salary to pay the mortgage, not including Real Estate taxes and homeowner’s insurance, which, for many buyers, approaches what they pay on principal and interest.
“The data and calculations show that housing on Long Island is not affordable for first-time buyers,” Mr. Moshé says. “The economic prognosticators say the economy is improving and the unemployment rate has gone down recently, but those who are working are seeing their salaries stagnate while home prices have escalated. First-time homebuyers are the engine of the Real Estate industry and once the engine stops, the Agents will see more homes going unsold.”
Charles Rutenberg Realty is one of the nation’s fastest-growing Agencies with more than 1,400 Agents on Long Island, Queens, Westchester, the Bronx and Manhattan. For more information, visit www.crrli.com.
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