First-TIme vs Move-Up Home Buyers
A recent Globe article caught my attention: "How the Housing Market Beats Up on First-Time Buyers" by Rob Carrick. It discusses how the government's actions to cool the housing market tend to most affect first-time buyers. It doesn't seem fair that they're the ones struggling to purchase a home when they aren't the ones driving up housing prices.
The reduction of the maximum amortiztaion period to 25 years doesn't really affect move-up buyers. They can make a larger downpayment from the profit off their previous property. First-time buyers who only put down 5% will have more interest and mortgage insurance premiums to pay in limited time, giving them high monthly payments.
Interest rate increases- another way to cool the entire housing market- would also hit first-time buyers the hardest. Obviously the more you borrow, the more vulnerable you are to rising rates.
This gap between first-time and move-up buyers means that there will be weakened demand for move-up buyers' properties from first-time buyers. This could slightly control price growth.
"We are really constraining the ability of young kids to get into the market." said Housing Consultant Steve Pomeroy. First-time buyers are wanting to invest in the real estate market and benefit from it like they see home owners doing. It just takes more work saving for the downpayment and mortgage payments than it did in the past.
