The Housing Crisis & An Uptick in First-Time Buyers

As the incoming Obama administration weighs the policy options for the economy and the housing crisis, the new team’s economic advisers should study the recently released National Association of Realtors (NAR) survey of home buyers.

– As a percentage of all home buyers, first-time home buyers increased slightly through mid 2008.
– These buyers are younger, made larger down payments and plan to stay in their home much longer than the prior year’s first-time buyers.

Focusing initiatives on first-time buyers might be the single most effective policy option:
1. First-time buyers have much more flexibility because they are not tied to an existing home obligation.
2. Real estate is the ultimate trade up market. By addressing the market at its base, this approach provides a long term benefit to the entire home market – helping to stabilize prices.
3. If we define the current economic crisis as a seriously over-leveraged economy, then this approach can be a small effort to help build equity in single family homes.

The fundamental of this approach is to leverage the market forces that can help. Nurturing first time buyers, who are NOT over-leveraged, could be the right policy at the the right.

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