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First-Time Home Buyers Losing Market Share

by devteam November 4th, 2013 | Share

The market share of first-timernhomebuyers continued to decline this year, slipping one percentage point to 38rnpercent and down from the long-term average of 40 percent.  This is one of dozens of homebuyerrncharacteristics included in the National Association of Realtors’® (NAR) 2013 Profile of Home Buyers and Seller releasedrntoday.</p

ThernProfile is compiled from a surveyrnconducted by NAR in July among home buyers and sellers who engaged in a realrnestate transaction between June 2012 and June 2013.  Surveys were mailed to a national sample ofrnabout 150,000 and generated 8,767 usable responses.  NAR said this was the latest in a series of NARrnsurveys on buyer/seller demographics, preferences, motivations and experiences datingrnback to 1981.  Results are representativernof owner-occupants and do not include investors or vacation homes. </p

NARrnchief economist Lawrence Yun said, “The share of first-time buyers appears tornbe only modestly below normal, but we have to keep in mind that investors havernbeen more active in recent years, and they’re not included in these results. Historically,rnfirst-time buyers are instrumental in housing recoveries because they helprnexisting home owners sell and make a trade.”</p

Sixty-sixrnpercent of buyers are married couples, 16 percent are single women, 9 percentrnsingle men and 7 percent unmarried couples. rnIn the 2010 survey 58 percent were married, 20 percent were singlernwomen, 12 percent single men and 7 percent unmarried couples. </p

Thernoverall market share of single buyers declined from 32 percent in 2010 to 25rnpercent both this year and last.  Inrnsurveys conducted prior to 2010 the market share was stable, usually movingrnonly one or two percentage points.</p

Yunrnsaid tight credit continues to affect homebuyers. “Single home buyers have beenrnsuppressed for the past three years by restrictive mortgage lending standards,rnwhich favor dual-income households who are more likely to have higher creditrnscores,” he said. “Not seen in this survey is the elevated level of investorsrnin recent years. The housing recovery would have been much weaker withoutrninvestors, who often purchase with cash.”</p

Thernmedian age of first-time buyers was 31, unchanged from 2012, and the medianrnincome was $67,400. The typical first-time buyer purchased a 1,670 square-footrnhome costing $170,000. The typical repeat buyer was 52 years old, earnedrn$96,000 and purchased a median 2,060-square foot home costing $240,000.</p

Sixtyrnpercent of first-time buyers explained that their primary motivation was arndesire to own their own home compared to 12 percent of repeat buyers givingrnthat reason.  Sixteen percent of repeatrnbuyers cited a desire for a larger home, 12 percent said they had moved for jobrnrelated reasons.  The rest ofrnrepeat-buyer responses were in single digits. rn</p

Afterrnhearing about the trend from its member NAR added a survey question aboutrnmultigenerational families and found that 14 percent of households did includernadult children, parents and/or grandparents. rnYun said this was another manifestation of the difficulty of obtaining arnmortgage and of slow growth in good paying jobs</p

Nearlyrnnine out of 10 buyers financed their purchase with average downpayments of 5rnpercent for first time buyers to 14 percent for repeat buyers.  First-time buyers used a variety of resourcesrnfor their downpayment:  78 percent tapped into savings; 27 percentrnreceived a gift from a friend or relative, usually from their parents; and 7rnpercent received a loan from a relative or friend. Among entry-level buyers whornsaid that saving for a downpayment was difficult, 54 percent said student loanrnexpenses were a factor.</p

Ninety-fivernpercent of entry-level buyers chose a fixed-rate mortgage, four out of 10rnfinanced with a low-downpayment FHA mortgage, and 8 percent used the VA loanrnprogram with no downpayment requirements. </p

Buyersrnused a wide variety of resources in searching for a home. Over nine out of tenrnused the internet and 90 percent of those also used a real estate agents,rntypically after doing an internet search. rnOther resources generating large responses were yard signs, open housesrnand mobile applications and search engines. rnBuyers searched a median of 12 weeks and visited 10 homes. </p

While sellers had been in theirrnprevious home for a median of nine years, first-time buyers plan to stay for 10rnyears and repeat buyers plan to hold their property for 15 years.</p

Therntypical home seller was 53 years old and their income was $97,500. Sellersrnmoved a median distance of 18 miles and their home was on the market for 5rnweeks, down from 11 weeks in the 2012 study. Forty-five percent moved to arnlarger home, 27 percent bought a comparably sized home and 29 percentrndownsized. Thirteen percent of sellers wanted to sell earlier but were stalledrnbecause their home had been worth less than their mortgage.  </p

Therntypical seller, who purchased a home nine years earlier, realized a medianrnequity gain of $25,000, a 13 percent increase over the original purchase price,rnwhile sellers who were in their homes for 11 to 15 years saw a median gain ofrn$52,000, or 28 percent.</p

For-sale-by-ownerrntransactions accounted for 9 percent of sales, matching the record lows set inrn2010 and 2012; the record high was 20 percent in 1987. The share of homes soldrnwithout professional representation has trended lower since last reaching arncyclical peak of 18 percent in 1997.</p

Eightrnout of 10 recent home buyers said their home is a good investment, and 44rnpercent believe it’s better than stocks; 91 percent were satisfied with thernbuying process. “Interestingly, 6 percent of all buyers had previously sold arnforeclosure or short sale, showing that sellers of distressed property arernbeginning to recover financially,” Yun said.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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