First-time homebuyers generally want less expensive, smaller, existing homes. At least that is what we gleaned from the recent survey conducted by the Deparment of Housing and Urban Development and the U.S. Census Bureau. This extensive study examines buyer traits and habits across a number of variables to indicate overall trends in the housing market. The most recent survey, released last week, found some interesting changes from previous results.
First-Time Homebuyers Make Up a Larger Share of the Market
In 2005 and 2007, the previous two surveys showed that new homebuyers made up approximately 35% of the overall home buying activity, based on the number of homes sold. This year’s survey shows that new homebuyers now make up 41% of the overall activity. This increase can be attributed to any number of factors, including first-time homebuyer tax credits, an increasing population in the age ranges where first-time purchases are greatest, and a decrease in the amount of move-up activity witnessed over the past two years.
First-Time Homebuyers Prefer Existing Homes
The sales of existing homes far outnumbers the sales of newly constructed homes for both first-time homebuyers and move-up buyers. Yet, first-time homebuyers choose existing homes in an even higher frequency. Just 13% of first-time homebuyers purchased a newly constructed home in the last two years. By way of comparison, out of all sales, newly constructed homes were purchased 17% of the time. This is a drop from the previous survey when 21% of all buyers chose a new home. This causes an interesting cycle. As more buyers chose existing homes, partly due to the increased number of less-expensive foreclosures on the market, the impact of their purchase is less beneficial to the economy. New homes create many more jobs and indirect spending than existing homes (from construction to materials, to suppliers, inspectors, and peripheral services, all the way to the gas station attendants, waitstaff, and local retail clothing stores). Because more existing homes were purchased, less money was pumped back into the economy continuing the downward cycle.
Demographics of First-Time Homebuyers
First-time homebuyers represented in the study had an average age of 34. Move-up buyers averaged 46.
The average income of first-time buyers was $67,000 per year. Move-up buyers averaged $97,000.
The average purchase price paid by first-time homebuyers was $184,000, compared to $297,000 for move-up buyers.
Preferences and the Selection Process
The average square footage for first-time homebuyers was 1,874 square feet, with 46% purchasing homes with less than 1,500 square feet.
The average square footage for a move-up buyer was nearly 2,550 square feet.
82% of first-time homebuyers bought a single-family detached home (not a condo or townhome).
Price was the most important factor for 38% of first-time homebuyers. Design and layout was second with 36%.
On average, first-time homebuyers looked at 15 homes before making their selection.
63% used some or all of their savings to pay the down payment.