These days home buyers are providing larger down payments than in previous years, as a result of tight credit conditions. While more buyers begin their search for a home on the Internet, majority purchase their home with the help of a real estate professional. These are the findings of an annual survey released in November by the National Association of REALTORS®.
The 2011 National Association of Realtors® Profile of Home Buyers and Sellers, a survey evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers, was released at the Nov. 11, 2011 Realtors® Conference & Expo in Anaheim, CA. The conference was attended by 20,000 Realtors and guests from across the country, including members of the Silicon Valley Association of REALTORS®.
Despite record housing affordability and historic low interest rates, the study found 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. Long-term averages show that four out of 10 buyers are typically first-time buyers.
Buyers also had notably higher incomes than last year. 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 last year. Repeat buyers purchased a median 2,100 square foot home costing $219,500, with an estimated median payment of $1,006.
"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," said Paul Bishop, NAR vice president of research. "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."
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 down payment size for both repeat buyers and first-time buyers was a full percentage point higher than in the 2010 study.
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; 9 percent sold stocks or bonds; 8 percent tapped into a 401(k) fund; and 7 percent received a loan from a relative or friend.
Ninety-four percent of entry-level buyers chose a fixed-rate mortgage. Fifty-four percent of first-time buyers financed with a low-down payment FHA mortgage, and 6 percent used the VA loan program which requires no down payment.
When asked where they first learned about the home they purchased, 40 percent said the Internet; 35 percent from a real estate agent; 11 percent a yard sign or open house; 6 percent from a friend, neighbor or relative; 5 percent home builders; 2 percent a print or newspaper ad. Ninety-one percent of 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.
"Despite the wide use of the Internet, buyers still believe it is important to use a real estate professional for their transaction," noted Gene Lentz, president of the Silicon Valley Association of REALTORS®. "All real estate is local and even within communities, neighborhoods vary. The Internet can only help you so much. An experienced REALTOR®, who is knowledgeable about the area and local neighborhoods, is able to bring value to the transaction and guide buyers in arriving at a decision that's right for them."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.