Spring has brought good news for the housing market. There has been a rise in pending and completed existing home sales. While new home sales declined significantly in March, the current pace of newly built home purchases is up almost 20% from a year ago.
NAR estimated that the first-time homebuyer share has increased to 30% in March, up from 29% in February and 28% in January. Easing mortgage standards have helped escalate this share. We will expect a return to the typical 40% share with the full economic recovery.
Despite the drop in new home sales in March, the first quarter of 2015 reached the highest level experienced by the market since 2008. Average effective mortgage rates for new home sales remain low: 3.93% on average for March, according to the Federal Housing Finance Agency. The first quarter of 2015 indicate that the market share for FHA-backed mortgage sales of new homes increased to 16%, up from 10% at the end of 2014. As more first-time homebuyers enter the market, this share may experience some growth, along with a decline in the cash share of new homes, which is currently 4%.
The quarterly Census data proves that the rate of household formations appeared to pick up at the end of 2014, with recent gains coming in at 1.5 million annualized pace, a significant uptick to post-recession trends. While much of this increase is and will continue to be concentrated in rental housing, higher rents will persuade existing renters to turn to homeownership in the coming years.
Source: National Association of Home Builders