NAR Paints Portrait of Typical Home Buyer

by devteam November 14th, 2011 | Share

According to arnrecent survey by the National Association of Realtors® (NAR), the typical U.S.rnhomebuyer spent less and borrowed lessrnin 2011.  These and other metrics of homernbuying were gathered in the NAR’s annual Profilernof Home Buyers and Sellers released Friday at the Realtors’ 2011 Conferencernand Expo in Anaheim, California.</p

The survey behind thernProfile has been conducted for many years by way of a survey instrument mailedrnto recent home buyers.  Because the purchasedrnproperties are not the principal residence, NAR cautions that surveysrnfrequently do not reach the investors and they are under-represented in thernresults.   </p

This year the surveyrnfound that first time buyers, who made up 37 percent of the market, down fromrnan historic 40 percent share, had a median age of 31 and income of $62,400, uprnfrom $59,900 in the 2010 study.  Thisrnbuyer typically bought a 1,570 square foot home for $155,000, taking on arnmedian monthly mortgage principal and interest payment of $794.  The typical repeat buyer was 53 years old,rnearned $96,600 (up from a $87,000 reported last year) and purchased a 2,100rnsquare foot home for $219,500 with a median payment of $1,006.  </p

Seventy-sevenrnpercent of respondents purchased a detached single-family home, 9 percent arncondo, 8 percent a town or row house and 6 percent some other kind of housing.  Despite the difference in square footage, therntypical home for both groups of buyers contained three bedrooms and two baths. rn</p

The median down payment</bfor all buyers was 11 percent, however for first-time buyers it was 5 percentrnand for repeat buyers 15 percent.  Inrnboth cases the median was a full percentage point higher than in 2010. Fifty-fourrnpercent of first-time buyers financed with a low-downpayment FHA mortgage, andrn6 percent used the VA loan program which requires no downpayment.  </p

Paul Bishop, NARrnvice president of research said  “Therndownpayment size for both repeat buyers and first-time buyers was a fullrnpercentage point higher than in the 2010 study, [is] another indication ofrntighter lending requirements.” </p

Bishop said ofrnthese requirements, “The bar has been raised to qualify for a loan.  Buying your first home has never been particularlyrneasy, but with record-high housing affordability conditions and a pent-uprndemand, we normally would expect a stronger performance.  This underscores how important it is to openrnthe credit spigot for creditworthy buyers – banks simply need to get back intornthe business of lending.  Higher homernsales would help create jobs through related economic activity.”</p

 “The median pricernpaid by repeat buyers in the survey was 2.1 percent higher than in the 2010rnstudy, but their income was 11.0 percent greater, despite lower interest rates.  First-time buyers paid 1.9 percent more, butrntheir income was 4.2 percent higher,” Bishop added.</p

First-time buyersrnwho financed their purchase used a variety of resources for therndownpayment:  79 percent tapped into savings,rn26 percent received a gift from a friend or relative, typically from theirrnparents, and 7 percent received a loan from a relative or friend.  Nine percent sold stocks or bonds and 8rnpercent tapped into a 401(k) fund. rnNinety-four percent of entry-level buyers chose a fixed-rate mortgage.</p

Buying patternsrnremained essentially unchanged from earlier surveys.  Buyers typically looked at a median of 12rnhomes over a period of 12 weeks and used a combination of resources in theirrnsearch.  Eighty-eight percent used therninternet and 7 percent a real estate agent; 55 percent used yard signs, 45rnpercent attended open houses, and 30 percent read newspaper ads.  A buyer typically starts on-line and thenrncontacts an agent.rn</p

Fifty-one percentrnof all homes purchased were in a suburb or subdivision, 18 percent were in anrnurban area, 18 percent in a small town, 11 percent in a rural area and 3rnpercent in a resort or recreation area. rnThe median distance from the previous residence was 12 miles, the samernas in the 2010 study.</p

More than half ofrnbuyers considered purchasing a foreclosure but didn’t buy one for a variety ofrnreasons: 29 percent couldn’t find the right house; 15 percent each reported poorrncondition and a difficult process.</p

Sixty-four percentrnof all buyers are married couples, 18 percent are single women, 10 percentrnsingle men, 7 percent unmarried couples and 1 percent other.  Last year 58 percent were married couples, 20rnpercent single women, 12 percent single men, 8 percent unmarried couples and 1rnpercent other.  “The growth in marriedrncouples suggests buyers with dual incomes are better positioned to qualify forrna mortgage in this tight credit environment,” Bishop said.</p

The typical home sellerrnwas 53 years old and their income was $101,500. rnSellers moved a median distance of 20 miles and their home was on thernmarket for 9 weeks, up from 8 weeks in the 2010 profile.  Forty-six percent moved to a larger home, 31rnpercent bought a comparably sized home and 23 percent downsized.  Sellers had been in their homes for a medianrnof nine years compared to eight years in the 2010 survey. </p

For-sale-by-ownerrntransactions accounted for 10 percent of sales, above the record-low 9 percentrnin the 2010 study, but well below the record high of 20 percent set in 1987.  The share of homes sold without professionalrnrepresentation has trended lower since last reaching a cyclical peak, which wasrn18 percent in 1997.

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About the Author


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

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