I work with many first-time homebuyers. Between January and September, I noticed a precipitous drop in my client base, as many of these buyers decided to wait out the market, first because of high home prices, and second because of uncertainty over the direction of the real estate market.

Starting in September, however, things began moving back toward a more normal mix of clients.

One of the big questions for next year is, will first-time homebuyers come back, or wait another year?

The share of first-time home buyers dropped earlier this year to its lowest level since 1987, according to the National Association of Realtors. First-time home buyers now account for 36% of home purchases, according to a study released last month by the Realtors group, down from 40% in the three previous years.

First-time buyers play a key role in the housing market. They provide a source of new demand for homes, and they also make it possible for owners of entry-level properties to trade up, creating a ripple effect that affects higher-priced sectors of the market. Declining affordability has made it difficult for first-time buyers to buy homes in many parts of the country, an important factor in the recent housing downturn.

... 45% of first-time buyers bought their home with no money down, according to the recent National Association of Realtors survey, up from 43% a year earlier.

Some analysts think prices need to come down more, and incomes increase, to bring parity.

Bank of America analyst Daniel Oppenheim says that, even with the recent price declines, he estimates that it would take a further 7% fall in home prices, combined with a 4% annual increase in nominal incomes, to bring affordability back in line with average levels over the past decade by 2008 &8212; if interest rates remain stable.

Complete story: First-Time Home Buyers Look at Houses Again - Real Estate Journal