Move-up buyers are responsible for a growing share of total home sales while first-time homebuyers continue to be hampered by tight credit, according to Wells Fargo Securities economists.
“We are definitely seeing the move-up buyer who is seeking a larger or more expensive home,” said WFS senior economist Anika Khan.
They have traditionally purchased homes in the $200,000 to $400,000 price range.
First timers were responsible for 50% of
These young adults are exhibiting “some of the weakest household formation,” she said during a conference call. And Federal Reserve research shows many of these potential buyers have relatively weak credit scores.
In 1999, about a third of first-time buyers under the age of 40 had credit scores below 620 and about 25% had scores between 620 and 680.
Today, mortgage originations for borrowers with “credit scores between 620 and 680 are down about 90%, while originations below 620 are almost non-existent,” Khan said Tuesday afternoon.
Meanwhile, first-time buyers have to compete with investors who are buying REO properties and lower priced homes.
WFS senior economist Mark Vitner noted during Tuesday’s conference call that mortgage underwriting continues to be tight, but more lenders are stepping up their mortgage lending.
“We have seen demand pickup across the country and lenders today are in a better to position to lend than a year ago,” Vitner said.
And despite the recent increase in mortgage rates, it will not deter homebuyers.
If mortgage rates range from 4.25% to 4.75% over the next several quarters, “it is still awfully attractive mortgage rates,” Vitner added.
