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May 28, 2014 | Weekly Commentary

The real estate market has strengthened in 2014; but, it is not as strong as anticipated.  One key reason:  first-time home buyers.

Economists, real estate agents and many home builders expected first-time and entry-level buyers to begin returning to the market this year, jumpstarting the sputtering housing recovery. So far, that hasn’t happened.

Less buying at the market’s lower end by first-time buyers has contributed to limiting sales of existing homes so far this year to a pace of roughly 88% of their 10-year average. It’s also a factor in stunting sales of newly built homes to a pace of roughly 60% of their annual average since 2000.

Some economists now predict that tight lending standards, high prices and the sluggish economic recovery will keep first-timers from returning in full force for several years. That likely means a slower pace for the housing recovery, already a drag on the broader economy in the past year.

“We likely have hit the bottom in the past six months or so regarding the lack of participation of first-time buyers,” said Lawrence Yun, chief economist for the National Association of Realtors. “It may take three years to return to normal first-time-buyer participation.”  Source, in part, The Wall Street Journal.

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