Since the financial crisis in 2008, the housing market has seen little stability. However, according to the M Report, The American Enterprise Institute (AEI) International Center on Housing Risk found that both the share and volume of first time homebuyers has consistently increased year-over-year during December.
The AEI’s First-Time Buyer Mortgage Share Index showed that first-time buyers accounted for an estimated 56.7% of existing home purchase mortgages with a government guarantee in December of this past year. This is a 1.2% increase over December’s share of 55.5% in 2014.
AEI attests this trend to improvements in the labor market, riskier mortgage lending, as well as decreasingly lower mortgage rates.
Edward Pinto, co-director of AEI’s International Center on Housing Risk, explained that “strong demand, in combination with shortness of supply, is driving home prices up faster than incomes and inflation.”
The Federal Housing Administration’s (FHA) share of first-time buyers amounted to just over 80%, Freddie Mac’s share was approximately 40%, while Fannie Mae’s share of first-time buyers has steadily been around 43.5% in December.
The Fiscal Times reports that one of the main driving forces behind this decrease in mortgage rates is a result of the plummeting United States stock market.
On Friday of last week, the average rate of the common 30-year fixed mortgage dropped down to 3.75% from over 4% just the week before.
“Just when it looked like 2016’s already impressive drop in rates might be running out of steam, we’re starting the day with the biggest improvement of the year, thanks to the ongoing rout in equities and oil,” said Matthew Graham, editor of Mortgage News Daily.
This drop in rates is not only beneficial to buyers due to lower monthly payments, but it also helps borrowers qualify for more homes for sale.
Mortgage rates were actually expected to rise throughout 2016, which makes this drop unexpected — a pleasant surprise for some, but not for all.