First-Time Buyers Support Housing Recoveries
By Phoebe Chongchua
It’s their first-time in the real estate market, yet they play a vital role in housing recovery. First time buyers help keep real estate markets alive by purchasing homes from existing owners who then typically go on to buy other homes.
According to the National Association of Realtors (NAR) first-time buyer numbers shrank a bit. First-time buyers accounted for 30 percent of home purchases, according to NAR’s 2013 Profile of Home Buyers and Sellers. This is a slight drop, 1 percent, from last year.
What does a first-time buyer look like? According to NAR, most are eager to own their own home. Their median age is 31, which is the same as it was in 2012. They earn a median income of $67,400 and their home purchase price is $170,000 for a 1,670 square-foot three-bedroom, two-bath home. Here’s what they bought:
- 80 percent purchased a detached house
- 7 percent bought a condo
- 7 percent bought a townhouse, and
- 6 percent bought some other type of housing
These buyers have many barriers to buying, but many said the biggest challenge for saving for a downpayment was having to make payments simultaneously on their student-loan debt.
The median down payment for their first home was 5 percent. The study found that most of these buyers used their savings to come up with the downpayment. Others received gift monies from relatives (often parents), a small percentage (less than 10 percent) received a loan from a relative or friend. Also, falling into the less than 10-percent group were those who sold stocks or bonds or tapped into their 401(k) retirement account to pay for their downpayment.
First-time buyers have specific ideas about what they want in a home and neighborhood. They’ve worked hard to come up with the cash to pay for the downpayment and now they want to make sure the home delivers precisely what they need.
Some of the things that matter most to this group of first-time homeowners are: the quality or perceived quality of the neighborhood, the home’s location to jobs, its affordability, and how conveniently located the home is to family and friends. High-quality school districts and leisure activities including shopping and entertainment also were listed high in importance.
With the rising cost of gasoline and the fact that these first-time buyers were taking on a new challenge of paying for a mortgage and maintenance expenses, transportation costs also influenced their home-buying decision. Other factors such as having energy-efficient appliances and a home that is economically efficient were very desirable by most. However, a large number of first-time buyers were more concerned with having efficient and cost-effective heating and cooling systems in place.