First-time homebuyers are an integral part of the real estate market, but with the housing market recovering, could they be facing additional competition?

First-time homebuyers, as any agent knows, are one of the most important demographics to a healthy real estate market, and the increasing market share of first-time homebuyers has been one of the many positive developments of the housing recovery heading in to 2013.

Indeed, the National Association of Realtors found that from June 2011 to June 2012, 39 percent of home sales nationwide were from first-time homebuyers, up from 37 percent a year earlier. As NAR also highlights, though, the real estate recovery is bringing with it some interesting developments, and some are wondering if those developments could end up impacting the market share of first-time homebuyers.

First-Time Homebuyer Pitfalls in 2013

The challenges facing first-time homebuyers involve a number of differing areans in the housing market:

• First, housing inventory is at its lowest mark in more than seven years, and with tighter supply comes steeper competition, which may put first-time homebuyers at a disadvantage.
• Also, first-time homebuyers may be going up against investors, who are specifically targeting many of the bargain-priced deals that often attract first-time buyers; however, boasting all-cash financing and considerable portfolios of properties, investors could have an edge on first-time homebuyers when eyeing the same property.
• And finally, it may be wise to steer your first-time homebuyer clients from immediately embracing FHA financing; as we’ve been chronicling, the FHA will likely tighten its mortgage standards yet again in 2013, so buyers could end up with more than they bargained for – and especially when conventional loans can be had for as low as 5 percent down.

Prepping Your First-Time Homebuyers for a Recovering Market

Regarding the aforementioned pitfalls, NAR recommends preaching flexibility and compromise to your clients, along with recommending fast action and especially pre-approval in the mortgage process, in order to stay competitive with more seasoned homebuyers.

Robert Padron, an agent with RE/MAX Cityview in Edgebrook, said that he has “absolutely” seen tighter competition for his first-time homebuyers, with many of them now facing multiple offer situations.

“A lot of owners are starting to hear that values are starting to inch back; up rates are very low, so it’s just very competitive,” Padron said. “I’m trying to be to set their expectations as realistic as possible, giving them hard facts about houses in the area, what things have sold for in the area and just letting them know if the property is priced at the market we need to be at the list price. Unfortunately most buyers don’t realize that until they’ve been outbid for their first house.”