1. Many first-time buyers have been using FHA loans for properties under $300,000. We see 3.5% to 5% down getting done all the time.
2. Most first-time buyers want a "finished unit" and do not want to do renovation or improvements. I think they need to be more open to this to get real value. Prices have to be real low (bottom 10% of pricing) for a first-time buyer to purchase and make material replacements in a kitchen, bath, on flooring or to make extensive mehanical repairs such as replacing HVAC.
3. Most first time-buyers (and most buyers in general) will not "low ball" or just offer what they feel is market price on an over-priced home. First time buyers are waiting for a comparable price in the lower 50% of the market before making offers. The reason is many sellers priced too high from the beginning don't have the ability to sell at market price (they owe more than the home is worth) or will not come down to true market pricing for a long time. So offering on higher priced properties and trying to negotiate is unattractive and usually the results are not good... no deal!