Recent home buyers are staying well within their means with notably higher incomes and modestly higher down payments than buyers in the previous year, due to the restrictive mortgage credit environment, despite historically favorable housing affordability conditions, according to a study released at the 2011 REALTORS® Conference & Expo.
The 2011 National Association of Realtors® Profile of Home Buyers and Sellers is the latest in a long-running series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers.
NAR 2011 President Ron Phipps notes financing obstacles were more challenging for entry-level home buyers. “First-time home buyers fell to a 37 percent market share in the past year from a record high 50 percent in the 2010 study,” he says. “Although last year’s findings were boosted by the home buyer tax credit, long-term survey averages show that four out of 10 buyers are typically first-time buyers. This segment is critical to a housing recovery because they help existing home owners sell and make a trade.”
Seventy-eight percent of recent home buyers said their home is a good investment, and 45 percent believe it’s better than stocks. According to survey results, most buyers believe in the long-term value of home ownership.
The study shows the median age of first-time buyers was 31 and the median income was $62,400, up from $59,900 in the 2010 study. The typical first-time buyer purchased a 1,570 square foot home costing $155,000; the estimated median monthly mortgage principal and interest payment was $794.
The typical repeat buyer was 53 years old and earned $96,600, notably higher than the $87,000 median reported in the 2010 profile. Repeat buyers purchased a median 2,100 square foot home costing $219,500, with an estimated median payment of $1,006.
Paul Bishop, NAR vice president of research, clarifies the impact of unnecessarily restrictive mortgage credit. “The bar has been raised to qualify for a loan. Buying your first home has never been particularly easy, but with record-high housing affordability conditions and a pent-up demand, we normally would expect a stronger performance,” he says. “This underscores how important it is to open the credit spigot for creditworthy buyers—banks simply need to get back into the business of lending.
Higher home sales would help create jobs through related economic activity.”
The median down payment for all home buyers was 11 percent, ranging from 5 percent for first-time buyers to 15 percent for repeat buyers. “The downpayment size for both repeat buyers and first-time buyers was a full percentage point higher than in the 2010 study, another indication of tighter lending requirements,” Bishop says
“To illustrate, the median price paid by repeat buyers in the survey was 2.1 percent higher than in the 2010 study, but their income was 11.0 percent greater, despite lower interest rates. First-time buyers paid 1.9 percent more, but their income was 4.2 percent higher,” Bishop adds
Although overall home prices have trended lower, other NAR survey data show the median price paid by owner-occupants is notably higher than paid by investors, who are under-represented in this study and largely use cash to purchase heavily discounted distressed homes.
First-time buyers who financed their purchase used a variety of resources for the down payment: 79 percent tapped into savings, 26 percent received a gift from a friend or relative, typically from their parents, and 7 percent received a loan from a relative or friend. Nine percent sold stocks or bonds and 8 percent tapped into a 401(k) fund. Ninety-four percent of entry-level buyers chose a fixed-rate mortgage.
Sixty-four percent of all buyers are married couples, 18 percent are single women, 10 percent single men, 7 percent unmarried couples and 1 percent other. Last year 58 percent were married couples, 20 percent single women, 12 percent single men, 8 percent unmarried couples and 1 percent other. “The growth in married couples suggests buyers with dual incomes are better positioned to qualify for a mortgage in this tight credit environment,” Bishop says
Buyers searched a median of 12 weeks and visited 12 homes, both unchanged from 2010. Nine percent of recent buyers also own one or more investment properties, and 4 percent own at least one vacation home.
As demonstrated in previous studies, buyers use a wide variety of resources in searching for a home: 88 percent use the Internet, 87 percent use real estate agents, 55 percent yard signs, 45 percent attend open houses and 30 percent review print or newspaper ads. While buyers also use other resources, they generally start their search process online and then contact an agent.
Ninety-one percent of home buyers who used the Internet to search for a home purchased through a real estate agent, as did 70 percent of non-Internet users, who were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.
Local metropolitan multiple listing service websites were the most popular Internet resource, used by 56 percent of buyers; followed by real estate agent websites, 46 percent; Realtor.com, 45 percent; real estate company sites, 40 percent; other websites with real estate listings, 38 percent; and for-sale-by-owner sites, 14 percent; other categories were notably smaller.
The biggest factors influencing neighborhood choice were quality of the neighborhood, cited by 67 percent of buyers; convenience to jobs, 49 percent; overall affordability of homes, 45 percent; and convenience to family and friends, 39 percent. Other factors with relatively high responses include neighborhood design, 32 percent; convenience to shopping, 28 percent; quality of the school district, 27 percent; convenience to schools, 22 percent; and convenience to entertainment or leisure activities, 21 percent.
The biggest reason people buy a home is the simple desire to own a home of their own, cited by 27 percent of respondents, including 60 percent of first-time buyers. The next biggest primary reasons for buying were desire for a larger home or a job-related move, each cited by 10 percent of respondents; a change in family situation or the affordability of homes, 8 percent each; and desire to be closer to family, friends or relatives, 7 percent.
The typical home seller was 53 years old and their income was $101,500.
Sellers moved a median distance of 20 miles and their home was on the market for 9 weeks, up from 8 weeks in the 2010 profile. Forty-six percent moved to a larger home, 31 percent bought a comparably sized home and 23 percent downsized.
While sellers had been in their previous home for a median of nine years, up from eight years in the 2010 study, first-time buyers plan to stay for 10 years and repeat buyers plan to hold their property for 15 years.
Information about NAR is available at www.realtor.org.