The New Breed of First-Time Home Buyers

by 30 Apr 2013

They are young, tech-savvy, debt-burdened, and cash-strapped. The entire American housing market economy depends on their participation, but the credit markets see them with apprehension. They are the elusive first-time home buyers; the missing, yet uncertain element in a full-blown recovery of the real estate market in the United States. 

A generally accepted assumption of real estate macroeconomics estimates that 40 percent of housing market participants must be first-time home buyers so that the market can be efficient and beneficial for the overall economy. In early 2013, U.S. News and World Report cited statistics that placed the percentage of first-time home buyers at just 35 percent. An updated article, however, puts that estimate closer to 40 percent.

Has the participation level of first-time home buyers really increased five percent in just a few months? Probably not. What is changing, however, is the profiling of these newcomers to the housing market. Real estate and marketing analytics firm Doorsteps recently issued new information on first-time home buyers and their reasons for approaching the housing market with caution.

The Young Millennials

Generation X made it through the dot-com bubble, the housing bubble and the Great Recession. Many of them were first, second and even third-time home buyers during the housing bonanza of the early 21st century. The time is nigh for Generation Y to take their turn as the great hope of the housing economy. 

Married couples and single females in their early 30s are the most likely candidates to buy their first home under current market conditions. Their average income is a respectable $62,800 per year, but many of them are saddled with about $30,000 in student loan debt. Only about 11 percent of single millennial males are in the market for a new home. 

It is clear that Generation Y cares about location, but young house hunters are not too crazy about long commutes. More than 15 percent are not willing to compromise when it comes to driving a long distance to get to work. It is important to remember that Generation X and Generation Y have both migrated from the suburbs in the last few years to be closer to urban centers that present work opportunities. 

Financing and Down Payment

Good news for mortgage lenders: Millennials are in the market for a mortgage. The bad news is that most do not qualify. The issues of Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) are still wild cards at this time for first-time home buyers. More than 76 percent of millennials expect to tap into savings when it comes to down payments, and they are willing to sacrifice vacations and entertainment expenses to accomplish this. 

Banks with heavy real estate-owned (REO) portfolios should also take note that only 35 percent of the new first-time home buyers will shun a foreclosed home. The great majority will consider purchasing distressed and REO properties.


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