The share of first-time home buyers has dropped to its lowest level in 27 years, highlighting the challenges facing the housing market’s stalled recovery, according to an annual survey released Monday by the National Association of Realtors.

Only 33 percent of buyers purchased their first home this year, down from 38 percent a year ago, according to the survey, which polled more than 6,500 people who bought a primary residence between July 2013 and June 2014. The last time the share was lower was in 1987, when first-time buyers made up only 30 percent of home purchases. The Realtors group cited several reasons for the decline, including a challenging job market and lending standards that tightened too much in the wake of the housing bust.

Source: National Association of Realtors

First-time buyers are a bedrock of the housing market, which is why so much attention is focused on their habits. When people purchase a first home, they enable existing homeowners to move or trade up. Having this turnover is critical to a robust housing sector and the economy, which relies heavily on the housing sector for growth. Typically, first-time buyers account for 4 out of 10 home purchases in any given year.  But the share has been off the norm since 2011,  the Realtors group reported.

Saving for a downpayment continues to be a major challenge as young adults struggle with tough job prospects, flat wage growth, rising rents, and massive student loan debt, Lawrence Yun, the Realtor group's chief economist, said in a statement. Of the 23 percent of first-time buyers who said cobbling together enough money for a downpayment was difficult, about 57 percent of them said their student loan debt was to blame. (The median downpayment for first-time buyers was 6 percent.)

Tight lending standards also shut out many potential first-time buyers, an issue that has alarmed the Obama administration.  The administration has been meeting with mortgage industry executives for months to figure out what it will take for lenders to ease up. Nearly half of first-time buyers said that getting a mortgage remains more difficult or somewhat more difficult than expected now that lenders are demanding higher credit scores than required in normal, pre-housing bubble times.


In the mean time, the cost of some government-backed loans also has discouraged potential first-time buyers from entering the market, Yun said.  The Federal Housing Administration, a popular source of low downpayment loans, has raised the fees that it tacks onto monthly mortgage payments five times since 2010.  The Realtors group  and the Mortgage Bankers Association sent letters to the agency asking it to lower these fees.

"To put it in perspective, 56 percent of first-time buyers used a FHA loan in 2010." Yun said. "The current high mortgage insurance added to their monthly payment is likely causing some young adults to forgo taking out a loan."