ML-Implode News - Housing Recovery Increasingly Prices Out First-Time Buyers

The depressed level of first-time buyers could prove to be a drag on the housing rebound and the broader economic recovery over the longer haul. First-time home buyers are the foundation of the real-estate market and are major contributors to their local economies, often buying up older homes, revitalizing communities and spending money on furniture and renovations.
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In June, first-time buyers accounted for 29% of purchases of existing homes, compared with 32% in June a year ago, according to the NAR's June existing home-sales report released Monday.
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To be sure, the sharp price gains that have been a hallmark of the housing recovery in many markets could moderate as mortgage rates rise, a point that would likely reduce competition among buyers. But for now, the housing market's brisk rebound over the past few years has exacerbated a familiar problem for many first-time buyers: financing.

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A recent jump in mortgage rates is another hurdle, raising monthly payments that could squeeze first-time buyers' budgets.

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Appraisals remain an issue: Cash buyers need not worry if nearby comparable sales come up short, but a first-time buyer might have to come up with the difference between their offer and the appraised value for the deal to close.

Meanwhile, the Federal Housing Administration, which insures loans with down payments of just 3.5%, has significantly boosted its insurance premiums over the past two years, which has raised the cost of buying for homeowners without a lot of cash for a down payment

This is where the "rubber meets the road" of Bernanke's great QE experiment, as it pertains to "Main Street." The fact that there is no recovery for first-time homebuyers is a glaring failure of the Fed's policies to mend the deep underlying damage to the economy. While there have been "average" gains, and even major home price increases, these data are merely diagnostic that the post-2008-crash policies have only improved the lot of those whose wealth is largely "financialized," and who are already well-off enough to benefit.

Our view around here? We are still in a real economy depression (not recession, not "funk" or "malaise"); the increase in home prices is actually a bad sign, and QE is doing major long-term damage to the economy. Articles like this resoundingly prove us right.

Relevant:

Housing Recovery Increasingly Prices Out First-Time Buyers