Absent a major shakeup in the market – which is not out of the question – the Greater Boston housing market looks to remain challenging for would-be buyers.
Every age cohort faces issues, from older Millennials with high student loan debt and low credit scores to downsizing Boomers unable to locate appropriate age-in-place solutions. Compounding the issue is that there’s not much to look at; bidding wars and waived inspections are becoming more common.
Rising interest rates are likely to compound the issue. Too many owners in reasonably priced communities don’t have enough equity to sell, or they bought a few years ago and are unwilling to give up a low interest rate in their current location. And some of them are spooked by reports like this one of the challenges of finding a new home.
The only buyers not struggling to find and purchase a new home are at the very high end of the market, with cash to spare and an abundance of options.
Not all hope is lost for the would-be first-time homebuyer, however. A recent report from mortgage tech company Ellie Mae found that, of loans closed in January, 35 percent of Millennial homebuyers opted for an FHA loan. The FHA reported that 82 percent of its recently closed loans have been to first-time homebuyers.
The options available on FHA loan obviously make it enticing for the first-time buyer. A low-down payment is certainly important, especially in Greater Boston where sky-high monthly rents preclude saving for a minor emergency, let alone a house. But perhaps more important is the accommodation the FHA offers buyers with lower credit scores and higher DTI.
The average Millennial first-time FHA purchaser in January had a FICO score of 690; the agency can accommodate DTIs up to 56 percent (provided the applicant has compensating positive factors in their credit history).
Last year in Massachusetts the top originators for FHA loans were Residential Mortgage Services, Fairway Independent Mortgage and Guaranteed Rate, according to The Warren Group, publisher of Banker & Tradesman. While the companies all originated statewide, the majority of Residential’s loans were in Bristol County; it was also No. 1 in Essex, Norfolk and Middlesex. Fairway was fifth overall in Suffolk and third in Norfolk; Guaranteed Rate was second in Suffolk, Essex, Middlesex and Norfolk.
Those three companies, and others in the FHA lending space, are poised for growth this year and in the years to come. All signs indicate that despite the spring market’s resurgence, a major influx of listings is not on the horizon. Student debt relief is exceedingly unlikely under the current administration – worse, the forgiveness promised to borrowers working in public service sectors may not materialize after all.
Still, accommodations for first-time buyers with high DTIs and low credit scores don’t help anyone if there’s nothing for them to buy. The blood is already in the water and the sharks keep circling – and there’s more of them every day.
