First-time homebuyers - a segment that typically targets distressed homes - currently make up just one-third of the market. While this is what would be considered their normal"" market share, it falls short of what's needed to offset the large volume of distressed properties coming down the line, according to the research firm ""Campbell Surveys
""Unfortunately, that's not enough demand to absorb the excess supply from homeowners defaulting on their mortgages,"" said Thomas Popik, Campbell Surveys' research director. ""As a result, we expect existing home sales for the spring/summer buying season to be significantly below last year and that will put continued downward pressure on home prices.""
The latest HousingPulse Survey from Campbell, conducted jointly with the industry news and data source _Inside Mortgage Finance_, shows that the proportion of first-time homebuyers in the housing market fell to 35.7 percent in April compared to 43.4 percent a year earlier.
At the same time, the survey's Distressed Property Index, which the companies' use to measure the overall health of the U.S. housing market, fell slightly to 47.7 percent.
Although the distressed index dropped, the share of first-time homebuyers posted an even sharper drop. The surveyors explain that this resulted in the gap between first-time homebuyers and distressed property supply climbing to 12 percent. Back in April 2010, the first-time buyer and distressed property gap was just 3.5 percent.
First-time homebuyers absorb housing supply, while move-up and move-down buyers produce no net take-up in inventory. Campbell Surveys says when the supply of
distressed properties exceeds the demand from first-time homebuyers, investors must step into the market to buy these properties, often at bargain-basement prices.
Investors accounted for 23 percent of the housing market in the month of April, up from 18 percent a year earlier, according to the HousingPulse Survey.
Campbell says a common business model for investors has been to buy damaged properties, renovate, and sell the properties to first-time homebuyers, but increasingly, investors are being forced to put renovated properties out as rental units as demand from first-time buyers drops.
Survey respondents in April reported that potential first-time homebuyers are having trouble finding foreclosed homes in move-in ready condition.
For the month of April, 45 percent of foreclosed properties were damaged and not inhabitable without renovation, according to the industry study. The survey report notes that because mortgage financing is generally not available for foreclosed properties that need major repairs, investors often buy these properties for cash.
Fifty-five percent of damaged foreclosed properties were bought by investors in the month of April, while only 27 percent were bought by first-time homebuyers, according to the HousingPulse Survey.
Survey respondents report that potential first-time homebuyers also are having difficulty meeting tough mortgage underwriting standards.
A real estate agent in Oklahoma commented, ""The frustration of obtaining a mortgage has been turning a lot of buyers off and driving them into renting. I recently visited with a leasing manager of an urban apartment building in downtown Tulsa. She said there are two key items that she is hearing her clients say: Ã¢â‚¬ËœThey cannot find the home they want on the market,' and Ã¢â‚¬ËœThe mortgage process was too frustrating.'""
Campbell says the deficit of first-time homebuyers is expected to weigh down the housing market in the coming months, the first buying season without a homebuyer tax credit since 2008.
The Campbell/Inside Mortgage Finance HousingPulse Survey polls more than 3,000 real estate agents nationwide each month to assess market trends surrounding homes sales and mortgage lending.