First-time homebuyers are purchasing in greater numbers – here’s why
By Erik J. Martin
CTW Features
There’s a first time for everything in life: your first day at school, first kiss, first car, first job and – eventually – first home. Now, more Americans are choosing to take that initial step into homeownership in a rising trend that’s got the real estate pros sitting up and taking notice.
Per the results of the National Association of Realtors recently published annual Profile of Home Buyers and Sellers survey, the share of sales to first-time home purchasers increased to 35 percent in 2016, up from 32 percent observed last year (marking a 30-year low) and the highest since 2013 (38 percent); 67 percent of first-time buyer respondents indicated that the main reason for their purchase was a desire to own a residence of their own.
Mike Pappas, CEO/president of The Keyes Company in Miami, isn’t necessarily surprised by these findings.
“The economy continues to improve with more jobs and low interest rates. First-time home buyers are realizing the benefits of homeownership, and we believe the share of sales to these first-time home purchasers will continue to rise over the coming years,” says Pappas, who notes that 61 percent of first-time purchaser transactions involved consumers younger than 35 years old, according to the aforementioned report. “Consider that there are now 80 million millennials who are in their prime homebuying years, and marriage rates are rising, which is a strong impetus for homeownership.”
Additionally, rental rates are proving unaffordable in many markets.
“It is more affordable to buy in certain areas than it is to rent, and for many, buying offers an opportunity to move up into something physically nicer than their rental and with a lower monthly payment,” says Justin Udy, lead agent with Justin Udy & Team Real Estate in Salt Lake City.
Amber Dolle, realtor with Sherman Oaks, Calif.-based John Aaroe Group, expects the rookie buyer purchasing trend will continue until market factors change the equation.
“The increase of first-time buyers will be directly influenced by job stability, economic growth in the market, and mortgage rate staying low. If those things continue, then so will the rise of first-time buyers,” says Dolle.
Sean Zweifel, broker in Denver with Modus Real Estate, forecasts a slowdown in this trend if and when interest rates creep up.
“I’m thinking they will go up a little bit just based on the fact that the Fed at some point will have to raise rates,” Zweifel says. “The newly elected president made his money in real estate, however, so maybe that can play a factor in helping the market for first-time buyers in the next few years.”
Meanwhile, if you are considering a first-time purchase, there are several steps you can take now to better position yourself on the path to ownership.
“Monitor your credit closely, work to increase your credit score, pay your bills on time, save for a sufficient down payment, avoid any major financial purchases when you’re in the process of buying, and talk to a good mortgage professional who can really guide you,” Zweifel says.
That last tip is especially important, Pappas says.
“A loan officer can get you pre-qualified and give you confidence to move forward,” Pappas says. “Also, see if you qualify for conventional loans that only require a 3 percent down payment, or an FHA loan that only requires 3.5 percent down, or even a VA loan that requires no down payment.”
Lastly, remember that the early bird gets the worm.
“The market and interest rates will change. Take advantage of the trends and get into something that provides you an opportunity,” Udy says. “Keep in mind that this is a long-term play, not a short-term one. You need to live somewhere – why not make it your own?”
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