Last winter, when the housing market had cooled and it seemed the only real estate news was bad news, the experts said the market recovery would be lead by first-time buyers.
Like stalled credit, the cycle of buyers and sellers grinds to a halt when first-time buyers disengage. It’s like sand in the gears of the real estate market."
But then came what’s been called "the perfect storm" for first-timers: houses became more affordable and interest rates dropped to near historically low levels. And first-time buyers came back to the market.
By March, Coldwell Banker reported that entry-level purchasers are now the engine driving home-buying activity in almost every major area in the US. All markets from coast-to-coast are ripe for a reawakening as the weather warms up. First-time buyers seem more acclimatized to economic factors, even though the barrage of bad news continues to flow. Those who are secure in their jobs, have accumulated good down payments, and have acceptable credit ratings are continuing to venture forward, undeterred by tighter lending criteria.
In May, first-time buyers were back in force and with them the beginning of the market recovery. While these consumers appreciate government incentives such as tax credits, greater Registered Retirement Savings Plan deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card.
Coldwell Banker correctly predicted that the activity at the low end of the housing market would kick-start sales in the mid and upper levels of the market as well, to the point that now it looks like 2010 will be one of the best years on record for resale real estate in the US.
So first-time buyers are getting credit for helping the country avoid a longer real estate slump, which has prompted some companies in the financial services industry to take a closer look at what first-timers are thinking about these days. According to a TD Bank study, there is a "marked difference" between the attitudes of today’s 18-34 year-old buyer and that of people aged 55+ when they were first-time buyers of the same age.
Just over half of today’s first-time buyers say they feel financially ready to buy a home, while only 37 percent of the other generations felt ready when they made the decision to buy. However, more than a third of today’s buyers say they couldn’t buy a home without the help of their family (compared to 16 percent of those 55+), and 27 percent of the 18-34 year-olds said they received money as a gift or borrowed from friends and family to buy their home. Only 10 percent of the older generations had financial help from friends and family.
For those 55 and older, paying off the mortgage was the top priority after moving in, but only 49 percent of the new generation of first-timers cites it as the top priority. Renovation work may be top of mind, because 48 percent of new first-time buyers are purchasing houses that are more than 21 years old, and 35 percent said they intend to renovate them.
When shopping for a mortgage, younger buyers shop around more. The older generations tended to stick with their own bank where they were already customers (62 percent), compared to 36 percent of the 18-34 group.
There are so many different options available now, and easier access to information with the use of the Internet, that it’s no wonder today’s first-time homebuyer shops around a bit more. Thirty years ago when people were looking for financing, they usually had limited choices. Now there are many options to explore with your bank including a variety of fixed-rate mortgages, variable-rate mortgages, and even green mortgages for buyers who want to lessen their footprint on the environment. Most of the recent first-timers bought a home in the city (64 percent, compared to 50 percent of the 55+ group), and most bought a house rather than a condo, even in the city.
About a third of the 18-34 year-olds ended up paying more for their home than they initially planned, while just 18 percent of the older generations said they spent more than they intended.
A different survey, highlights the real reason why first-time buyers are motivated to buy. Eighty-four percent of first-timers agreed with the statement that owning a home provides a greater sense of emotional well-being and security.
Eighty-five percent said that even though homeownership may mean more work and effort, they would rather own than rent. Eighty-eight percent in the survey said they would feel more financially secure owning their own home.
For more information go to www.phillyrealestateinformation.com
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