Last year, the Federal Housing Administration lowered mortgage insurance premiums by $800 or more in an effort to boost home ownership. The FHA predicted that about 250,000 new home buyers would enter the market over the three years following the cut, and indeed the number of FHA loans has jumped in the past year, according to data from RealtyTrac. But the jump hasn’t come from first-time buyers, according to experts.
The American Enterprise Institute, a conservative-leaning think tank in Washington D.C., says that the decrease in mortgage insurance premiums has encouraged older buyers to choose FHA over other home loan products. “Recipients just used the added buying power to purchase more expensive homes,” says AEI’s Edward Pinto.
Meanwhile, younger buyers have been discouraged from entering the market by the stagnating housing inventory, according to AEI. “Lowering the premium didn’t do anything to create more housing supply, but just created more demand in what’s already a seller’s market,” Pinto says.