Homebuilder exchange traded funds may enjoy a more long-term growth spurt as loan data reveal first-time homeowners have not been jumping into the market yet.
In 2014, only 25% of new home buyers took out residential house loans with less than 3% down, the lowest level in a decade, which suggests that first-time buyers have not been supporting the housing recovery, reports Quentin Fottrell for MarketWatch.
“It may seem like a lot but the average over the past 11 years has been 33%,” Daren Blomquist, vice president at RealtyTrac, said in the article.
First-time buyers are among the most likely to acquire loans with low down payments since they have less capital to put down. Blomquist points out that the government has been promoting low down payment loans to encourage first-time buyers, and many new home owners can receive loans with below 3% down through assistance programs.
Recently, Fannie Mae and Freddie Mac introduced 3% down payment loans while the U.S. Department of Housing and Urban Development also lowered insurance premiums that low-down-payment borrowers have to pay. [Lower Down Payments Could Stimulate Homebuilders ETFs]
“A lot of first-time home buyers don’t have a lot of money to put down or else they would be participating in this market more,” Blomquist added. “If first-time home buyers don’t return to the market in greater numbers, it signifies a shift where a primary avenue of building wealth for middle-class Americans — homeownership — is no longer as readily available.”