First time home buyers account for 31% of all home sales, according to Lawrence Yum, chief economist for the National Association of Realtors. This percentage is down from around 40% of the market from years past. One reason for this downturn is because student debt has tripled just over the last decade. Providing additional frustration is the limited amount of inventory for new starter homes as builders have focused on more expensive homes. Despite the fact that interest rates are at near historic 3.35% lows (think back two decades ago when a mortgage rate of 8% seems like a good deal) the needle hasn’t moved up much when it comes to millennials buying their first home.
However, help is on the way, at least here in Alaska. This week Wells Fargo announced a $3.3 million program for Alaskans seeking to buy a new home. In conjunction with Neighbor Works, which will administer the program and provide education, buyers who qualify with a maximum income of $104,900 for a family of four, are eligible for up to a $10,000 down payment assistance. Veterans, service members, teachers, law enforcement officers, firefighters and emergency medical technicians, may receive $12,500 in assistance within eligibility requirements. The only caveat is that buyers must own and occupy the home for five years in order for the grant to be forgiven. This program will help 300 Alaskan families purchase a new home and I’m predicting will be quickly absorbed by the end of the year. Combined with a permanent fund dividend (the amount yet to be determined!) buyers, and particularly millennials, will have an opportunity for home purchase.
Alaska also has a HUD 184 program for Alaska natives which allows them to purchase a home with a down payment as low as 2.25%. The program, which is for all eligible Native Americans, has more flexible borrower qualifications and lower interest rates than conventional rates because the Department of Housing and Urban Development guarantees the loan. Both of these programs are available through specific lenders so buyers should do their shopping before making any commitment to a mortgage lender.
Not eligible for any of these programs? A recent survey revealed that a third of all first time homebuyers received assistance from a family member. So forgive and forget all those petty quarrels! Your lender may actually be sitting next to you at this coming Thanksgiving dinner.
And on a local level, Raven Mortgage, an affiliate of Hultquist Homes, is offering $8,000 in buyer paid closing costs on some of their affordable and finished inventory. I wouldn’t be surprised if other builders also followed suite during the upcoming Parade of Homes.
Combined, these opportunities should help absorb some of the inventory that may be coming on the market as a result of the state’s budget cuts to local programs and schools. Last week our inventory for single family homes was only 625 so despite all the sunshine and fishing, now may be just the right time to go shopping for a new home.