First-time home buyers are considered very important to the real estate industry – some go as far as to say that they keep the market healthy. And with the July statistics showing that the number of people buying a home for the first is going down, analysts are starting to look at reasons why this is happening. The expiration of the tax credit is being seen as the number one culprit.

Campbell/Inside Mortgage Finance recently released its monthly Survey of Real Estate Market Conditions. It says that first-time home purchases accounted for just 39% of the total purchases in July. This is lower than the 48% share that was seen for the month of March.

July’s number on first-time home buyers is the lowest in at least a period of one year. And Campbell Surveys director Thomas Popik blames it on the termination of the tax credit. He further says that activity by first-time home buyers is likely to fall further in the next months.

“The end of the tax credit has clearly had an effect. First-time home-buyer participation is continuing to drop. We expect a further decline in first-time home-buyer activity, perhaps reaching as low as 30% to 35% of the market by the fall months,” Popik says.

The tax credit ensures $8,000 for those who are willing to spend on a house, even given the condition of today’s market. With its end, it also brought along with it home sales. Existing home sales plummeted in the month of July.

The number of homes succumbing to foreclosures has fallen in the second quarter of 2010, thanks to the existence of the tax credit. Mortgage Bankers Association predicts that the number will again soar high, now that the tax credit no longer exists.

Because first-time home buyers have the unique ability of soaking up excess inventory, they are pegged as crucial to the housing industry. Repeat buyers don’t have this attribute as they are also selling as well as buying homes. With first-time buyer activity dropping, home prices might drop as well this summer and fall.

Campbell/Inside Mortgage Finance polls more than 3,000 real estate agent participants for it monthly survey.