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Foreclosure delays may reduce impact of first-time buyers

Foreclosure delays may hold back first-time buyers.

Foreclosure delays may hold back first-time buyers.

While much of the long-term impact of the recent foreclosure controversy remains to be seen, a new report says that one of the immediate effects could be a further reduction in moving activity from first-time buyers.

Earlier this year, when the tax credit was active, first-time buyers looking for inexpensive properties were helped by moving into foreclosures, playing an important role in reducing the inventory of homes and bringing up prices, according to Campbell Surveys.

"Current homeowners sell a home when they buy a home, resulting in no net take-up. Likewise, many investors buy, rehab, and sell, providing no take-up," said Thomas Popik, research director for Campbell Surveys. "First-time homebuyers absorb excess housing stock. However, in recent months, they have been able to play this role less frequently because of restricted financing."

The effect of those foreclosures could also be more severe in the coming months. The percentage of first-time buyers has fallen from 42.4 percent in June to 34.4 percent in September.

One study is already noticing a sharp drop in home prices. A report from Clear Capital says that home prices have fallen by 5.9 percent in August and September, and says that trend could continue in the coming weeks.