New Home Buyers Use Installment Loans for Purchase

First-time buyers emerge

Installment loans are aiding first-time home buyers make the purchase of their dreams. When moving to Phoenix, Arizona, Kostas Kalaitzidis longed for a home. Due to his low-income and the high-cost market, he was unable to buy. Just one year later, he was able to buy a formerly-priced $220,000 house for just $82,000. “I’m very glad I waited,” he says, “people like me are the ones buying now.”

Declining home values

It is estimated that 53% of all home sales are being made by people like Kalaitzidis, according to the National Association of Realtors. The group also says, “While America’s declining home values have wrought havoc on home sellers, owners and lenders, first-time buyers can celebrate the housing market bust, and may even help fix it.” They expect first-time buyers to comprise the bulk of buyers throughout the rest of 2009.

Although salary is a factor, most first-time buyers are making the move as a result of the huge decrease in home prices. For example, Kalaitzidis’ home boasts 2,200 square feet, four bedrooms and 2 ½ baths. At $82,000, it’s a relative steal in the real estate market. In addition, tax credits are plentiful for first-time buyers.

According to James Saccaccio, CEO of RealtyTrac, “The metro areas with the highest level of foreclosure activity paint a picture of concentrated problems in a relatively small number of hard-hit areas. Sales activity appears to be increasing in some of these markets as home prices have fallen to levels that are attractive to first-time homebuyers.”

New buyers are plentiful

Kalaitzidis is not alone. Many first time buyers are seeing homeownership as a potential accomplishment they could not have attained without the struggling market. Albert Ko of Orange County, California first moved to the area in 2007 when the average price of a moderate home was $800,000. He just was approved for $400,000 and most homes in the area have dropped to just about that level. “Two years ago, this would have been out of the question,” Ko confirms.

Though current homeowners are suffering the lost equity, new potential buyers are seeing affordable housing as a huge benefit. With the dream of owning a home as a viable option, they are looking to installment loans, family borrowing and extreme budgeting as methods of reaching their goals. For the first time, many potential borrowers are taking advantage of the recession and downfall of the housing market.

Burns Consulting Group study

According to Burns’ Consulting Group the average home costs 25% of the owner’s pretax income to sustain, down from 44% just three years ago. That means that a household with a $60,000 income is now spending about $15,000 a year for the fixed-rate mortgage, down from $26,400. That’s a substantial savings for a family.

Finally a homeowner

There is a light at the end of the recession. Many people who were formerly unable to even consider purchasing their own home are now enjoying the affordability brought about by the recession. Home values are down and down payments needed to purchase are much smaller. Some potential homeowners are working with lenders for installment loans to help fund their purchases as they move into the most-coveted title of “homeowner.”