PhotoFirst-time homebuyers are finally making up a significant part of the housing market, but they are facing difficulty on several fronts.

A survey by the Michigan State Housing Development Authority (MSHDA) quizzed Michigan consumers with annual household incomes between $50,000 and $125,000. It found many wanted to buy a home but more than half – 55% – expressed concerns about being able to come up with the down payment.

Nearly a third also expressed concern that they would not be approved for a mortgage and 21% worried they lacked enough information to make the right decision. Some of these concerns might be tied to the recent past.

"Many of today's first-time homebuyers remember the 2008 housing crisis and the impact it made on many family and friends and that is reflected in the uncertainty and apprehension we see in this study," said Mary Townley, director of homeownership at MSHDA. "Our job is to help empower these first-time homebuyers to become confident, smart buyers and realize the dream of homeownership."

Competition from investors

First-time buyers also face another problem – increasing competition from investors, who are looking for attractively-priced homes they can flip or convert to rental property. According to Realtor Mag, a publication of the National Association of Realtors, investors are very active in the $200,000 and under range.

“We are losing inventory at a record pace and in the segment of the market with the most demand,” says Javier Vivas, a analyst.

Investors can be both a blessing and a curse for the housing market. House flippers that purchase rundown, deficient houses and renovate them are adding to the housing inventory. But if they step in and purchase a home that an owner-occupant might also buy, they are removing inventory, especially if they are converting the houses to rentals.

Investors also tend to purchase homes without financing, giving them an advantage over an owner-occupant who needs to get a loan. A seller is usually more likely to accept a cash offer over one with a financing contingency. ATTOM Data Solutions reports a full one-third of all single-family and condo sales last year were made without financing, a record.

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