Once the refinancing binge is over, Federal Reserve Board officials are hoping lenders will make credit more available to first-time homebuyers.
In 2011 purchase mortgage transactions hit their lowest level since the early 1990s, Fed Gov. Elizabeth Duke told the
“From late 2009 and to late 2011, the fraction of individuals under 40 years of age getting a mortgage for the first time was about half of what it was in the early 2000s,” she said.
And more recent Fed data are not showing any increase in home purchases by owner-occupants.
At some point the refi boom will run out of steam and lenders will end up with excess capacity. “Lenders might then ease credit conditions to fill declining refinance pipelines with additional purchase volume,” Duke said.
But the Fed is concerned that uncertainty over mortgage regulations, capital standards and other nonmarket forces could make lenders more cautious than normal.
If credit remains hard to get, would-be buyers will end up as renters.
“And without first-time homebuyers, the move-up market will be sluggish, new and existing homes will be more subdued, and purchase mortgage volumes will return only slowly,” Duke said.
