Despite an improving job market and low interest rates, the share of first time buyers fell to its lowest point in nearly three decades, according to an annual survey released today by the National Association of REALTORS®.
NAR’s profiles of buyers and sellers dates back to 1981. The average rate of first-time buyers during that time has been around four out of 10 purchases. In this year’s survey, the share of first time buyers dropped 5 percentage points from a year ago to 33 percent, representing the lowest share since 1987 (30 percent). 
“Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” says Lawrence Yun, NAR chief economist. “Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums.”
About the survey
NAR mailed a 127-question survey in July 2014 using a random sample weighted to be representative of sales on a geographic basis. A total of 6,572 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 9.4 percent. The recent home buyers had to have purchased a home between July of 2013 and June of 2014. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100 percent. All information is characteristic of the 12-month period ending in June 2014 with the exception of income data, which are for 2013. Order a copy of the report online or by calling 800-874-6500. The study costs $19.95 for NAR members and $249.95 for non-members.
When asked about the primary reason for purchasing, 53 percent of first-time buyers cited a desire to own a home of their own. Most in this group say they plan to stay in their home for 10 years and they are 10 percent more likely to purchase a townhouse or a condo than repeat buyers. The median age of first time buyers was 31, unchanged from the last two years, and the median income was $68,300 (up from $67,400 in 2013). The household composition of all buyers responding to the survey was mostly unchanged from a year ago; 65 percent were married couples, 16 percent single women, 9 percent single men, and 8 percent unmarried couples. Thirteen percent of survey respondents were multi-generational households, including adult children, parents and/or grandparents.
The typical first-time buyer purchased a 1,570 square-foot home costing $169,000. The survey also found that 47 percent of first-time buyers said the mortgage application and approval process was much more or somewhat more difficult than expected (an increase of four percent over last year). Among 23 percent of first-time buyers who said saving for a downpayment was difficult, more than half (57 percent) said student loans delayed saving, up from 54 percent a year ago.
In addition to tapping into their own savings (81 percent), first-time buyers used a variety of outside resources for their downpayment. Twenty-six percent received a gift from a friend or relative, with 6 percent receiving a loan from a relative or friend. Ten percent sold stocks or bonds, or tapped into a 401(k) fund. Ninety-three percent of entry-level buyers chose a fixed-rate mortgage, with 35 percent financing their purchase with a low-downpayment Federal Housing Administration-backed mortgage (down from 39 percent in 2013), and 9 percent using the Veterans Affairs loan program with no downpayment requirements.
“FHA premiums are too high in relation to default rates and have likely dissuaded some prospective first time buyers from entering the market,” says Yun. “To put it in perspective, 56 percent of first time buyers used a FHA loan in 2010. The current high mortgage insurance added to their monthly payment is likely causing some young adults to forgo taking out a loan.”
MLS List your home $175 information: Click Here
Source: NAR 11/03/2014
