The decline in home values, increases in rental rates and lower mortgage rate environment has resulted in making housing more affordable. This is no doubt contributing to greater activity by first home buyers.
Reflective of the overall cautious nature of consumers and the decline in dwelling values, the average first home buyer loan size has fallen by -1.2% over the 12 months to May 2012. The graph highlights that over the past decade the average first home buyer loan size has fairly consistently been increasing. This is also reflective of the fact that there have been incentives available for first home purchasers over this time and the fact that for most of the past decade home values have been increasing. Given this, the current declines in the average loan size is reflective of a much different economic and financial environment, with housing credit growth limited and home values having been trending lower since they peaked in October 2010. The average first home buyer loan size peaked in December 2009 and is currently -2.1% below this peak.
Although we expect that overall market conditions are likely to result in further improvement in first home buyer activity, it must be noted that they are coming off their lowest levels since January 2004. Other factors that are likely to restrain how many first home buyers enter the market are tight finance conditions and requirements, the low level of new housing construction, the significant level of demand which was bought forward in to 2009, and an overall lack of confidence by consumers.
This article first appeared on RP Data.
