First-Time Buyers Are on Their Way Back

First-time home buyers have been a sluggish segment of the housing market in recent years, but Barclays equity researcher Stephen Kim is betting on their return. Kim recently released a report, “The Return of the First-Time Buyer,” which outlines three reasons why he believes first-timers will soon be back. In fact, he’s betting that entry-level buying will be a key theme in homebuilding industry this year.

Kim says that job growth is reaching an important threshold for improved household formation. “The cumulative number of jobs created over the past several years has now reached the point where each new job will drive greater household growth,” Kim writes.

Also, Kim points to the loosening of credit, with more lenders showing willingness to lend to borrowers in the 600-700 FICO range.

Kim also notes that buying a home is still about 20 percent cheaper than renting, and the affordability of housing will be an attraction for first-timers to enter sooner rather than later before mortgage rates and home prices rise more.

But Kim says there’s one big hurdle first-time buyers will continue to face: Student loan debt.

Source: “Barclays: 3 Reasons the First-Time Homebuyer Will Return,” HousingWire (May 1, 2014)