"From an individual perspective, the best investment you can make is to buy a primary residence," John Paulson, who runs the hedge fund Paulson & Co., said in a statement recently. "Today, financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent."
But despite low interest rates and slowing home prices, first-time home buyers have mostly been absent from the housing recovery so far. They made up 28 percent of existing-home sales in June, but typically take up 40 percent of the market, according to the National Association of REALTORS®.
"The first-time home buyer is just not the factor that it once was," says Peter Boockvar, chief market analyst at the Lindsey Group, a D.C.-based economic advisory firm. "Without the first-time home buyer, and now with the reduction in the pace of investor purchases, the recovery will remain lumpy."
While first-time home buyers' numbers remain low and home prices and mortgage applications have fallen in recent months, not all analysts are predicting that housing prices will fall. Barclays analysts, for example, expect housing prices to rise about 7 percent this year.
Last year's "double-digit home price gains were unsustainable" because income growth has been about 2 percent, says Boockvar. "We should be cheering slower home price gains, not fearing them, because it is the main factor that will entice the newly created household to consider buying instead of renting."
SOURCE: Daily Real Estate News
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