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Where have the first-time buyers gone?

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Although the return of stability to the housing market has helped lift many underwater homeowners back into positive home equity and encouraged other owners to move up to larger or more costly homes, the recovery lacks the robust participation of one important group: young first-time buyers.

According to the U.S. Census Bureau, the share of home owners 25 to 29 dropped to 34.1 percent in 2013 from 40.6 percent in 2007. It’s tough to come by reliable data on first-time home buyers, but real estate and mortgage experts say they are seeing fewer in the marketplace.

‘‘There are multiple reasons for the lack of participation in the housing market by first-time buyers and, unfortunately, I don’t think the situation is likely to change in the near future,’’ said Rick Sharga, executive vice president of Auction.com. ‘‘The main culprit is that the age cohort of first-time buyers, who are normally 25 to 35, was hit the hardest by the recession. Unemployment is still high among that age group, and the jobs they do have are often at low wages or are even part-time.’’

Jason Furman, chairman of the Council of Economic Advisers, said at a recent Zillow forum that the unemployment rate among millennials, generally identified as those born between 1980 and 1995, peaked at 14 percent in 2010. However, the unemployment rate in this age group now is 9 percent, still higher than other age groups.

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Employment is not the only reason millennials are avoiding homeownership, however. Other factors such as tougher loan standards, student loan debt, and a lack of affordable homes are having an impact. Researchers also are looking into whether a long-term attitude shift away from homeownership is occurring or whether millennials are simply delaying buying a home along with waiting longer to get married and start a family.

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‘‘One of the biggest issues keeping first-time buyers out of the market is the difficulty in obtaining a mortgage,’’ says Anthony Hsieh, founder, chairman and chief executive of LoanDepot.com.

Hsieh points out that the average credit score for approved loans has risen above 750 for loans guaranteed by Fannie Mae and Freddie Mac. In the early 2000s, a credit score of 700 was enough to earn the lowest interest rates and fees; now that credit score is barely acceptable.

‘‘The primary reason that first-time buyers aren’t participating in the housing recovery is tight underwriting standards for home loans,’’ says Lawrence Yun, chief economist for the National Association of Realtors. ‘‘FHA loans were traditionally available to help renters buy homes, but the FHA has drastically raised the mortgage insurance premiums on these loans so they’re less affordable.’’

Hsieh says that FHA insurance premiums were raised as a result of problems with borrowers defaulting on loans, but that new buyers are paying the price for those mistakes.

‘‘The pendulum has shifted from fast-and-loose to too-tight mortgage lending standards, and at the same time the economy is not conducive for young renters to become buyers,’’ says Nela Richardson, chief economist for Redfin.com. ‘‘Labor force participation among young people is lower than normal and even those that are working are hurt because median income has stagnated while prices have risen.’’

Another issue that works as a double-edged sword for buyers is higher rents. According to research by Zillow, renters during the first quarter of 2014 spent 30 percent of their incomes on rent. In many high-cost cities, that number is higher.

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Student loan debt is also holding back potential buyers because repayment of that debt sometimes precludes saving money to buy a home.

‘‘People with student loan debt are much less likely to become buyers, in part because of the [federal government’s] new ability-to-repay regulations that set a hard cap on borrowers’ debt-to-income ratio at 43 percent,’’ Sharga says. ‘‘Young adults with relatively low wages and high levels of student loan debt won’t qualify for a loan.’’

It used to be that having a student loan meant you were more likely to buy a home because it meant you had a college degree and therefore a higher income, but now having a student loan reduces the likelihood of becoming a homeowner, Richardson says. The impact of the debt depends a lot on the size of the loan.

Many first-time buyers turn to FHA loans because of the low down-payment requirement of just 3.5 percent, but Hsieh says that the higher mortgage insurance premiums and low maximum loan amount in many areas make these loans less appealing to many borrowers. However, conventional loans are harder to qualify for and typically require a down payment of at least 5 percent. The median sales price in the D.C. region in July was $530,000. A minimum down payment of $18,550 would be required for an FHA loan or a minimum down payment of $26,500 would be required for a conventional loan. In addition, buyers need cash for closing costs and emergency reserves.

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Even those borrowers who do have the income, assets, and credit to qualify for a loan will find headwinds because fewer homes are available on the lower end of the market.

According to research by Redfin, inventory in the bottom three quintiles is significantly lower in 2014 compared with 2009. In addition, the average price in the bottom quintile rose by 55.4 percent between June 2009 and June 2014, from $123,100 to $191,300, the highest jump by price category other than the highest-priced quintile, which experienced a 56.7 percent increase.

‘‘Builders are still building very limited numbers of homes, so they need to make them bigger to make them more profitable,’’ Sharga says. ‘‘At the same time, they’re not seeing a lot of demand from first-time buyers. As the job situation improves, housing prices will normalize and the builders will start building more homes for first-time buyers, but it could be years before that happens.’’

Researchers say that the overall aspiration to become a homeowner appears to be in place, but that the purchase may be delayed. Yun points out that people are getting married and starting families later and staying in school longer to complete a graduate degree while they wait for the economy to improve, all of which delays buying a home. According to the Census Bureau, the median age for men to marry in 2013 was 29, up from 26.5 in 1993; for women, the median age for marriage was 26.5 in 2013 and 24.5 in 1993. Household formation rates, which dipped during the recession, are still below average.

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Zillow’s Housing Confidence Index continues to show consumer aspiration for homeownership. In the most recent survey, 4 million people said they wanted to buy a home within the next year.

‘‘While millennials marry later and have kids later, once they take those steps they look a lot like earlier generations,’’ Humphries says.

Another phenomenon that researchers say could be impacting millennials is the interest in a shared economy rather than an economy based on ownership.

‘‘We’re watching this age group to see if we’re seeing a permanent change in behavior or a temporary one, but right now they’re showing a preference to use public transportation, bike-sharing services, and car-sharing services like Zipcar and Uber instead of buying a car,’’ Richardson says. ‘‘They stream their movies or rent them instead of buying DVDs, and they even use Pandora or Spotify instead of buying music.’’

So far, however, researchers aren’t finding evidence that this translates to millennials never becoming homeowners, because in surveys they still express an interest in owning a home in the future.

‘‘In my view, there’s not a fundamental shift in preference toward renting,’’ Furman says. ‘‘The decline in first-time buyers appears to be related to more mundane economic circumstances, but we can’t rule out entirely the possibility that this is a long-term shift until more time passes.’’