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6 Important Facts about First-Time Homebuyers

by Peter Thomas Ricci

First-time homebuyers continue to lose market share in today’s housing market

first-time-buyers-nar-profile-buyers-sellers

First-time homebuyer share has dropped to its lowest level in 27 years, with just 32 percent of all existing-home sales going to first-time buyers in 2015.

That was one of the main findings of the 2015 Profile of Home Buyers and Sellers from the National Association of Realtors, a massive study of consumer trends in the housing market. We’ll be taking a detailed look at the report’s many findings in the coming weeks, but for now, here were the five notable facts on first-time buyers:

1. A 32-Percent Share – Not since 1987, when their share was 30 percent, have first-time buyers had so little presence in the market. As our graph below demonstrates, first-time buyer share has fluctuated over the years, but its long-run average is around 40-41 percent (the high shares in 2009 and 2010 were on account of the first-time homebuyer tax credit policy, which offered consumers a tax deduction if they bought their first home).

2. Northeast Prominence – Interestingly, first-time buyers were the most prominent in the Northeast region, where they accounted for 43 percent of existing sales. That compares to 38 percent in the Midwest, 30 percent in the South and just 26 percent in the high-priced West.

3. Intriguing Household Types – The household composition for first-time buyers differs substantially from repeat buyers. While married couples comprise 56 percent of first-time buyers, they make up 72 percent of repeat buyers, while unmarried couples, at 13 percent of first timers, are a far higher share than the 5 percent of repeat buyers. Also intriguing was the divide between single female buyers and single male buyers – among first-time buyers, single females had a 7 percentage point advantage (18 percent to single males’ 11 percent), and for repeat buyers, the advantage was 6 percentage points (14 percent to 8).

4. The Demographics of First-Time Buyers – Unsurprisingly, Millennials and Gen Xers comprise the lion’s share of first-time purchases, with 58 percent aged 25 to 34 and 19 percent aged 35 to 44. First-time buyers are also a relatively diverse bunch, at least compared with repeat buyers, who are 88 percent white, 5 percent Hispanic and only 3 percent black; first-time buyers, meanwhile, are 78 percent white, 9 percent Hispanic and 7 percent black.

5. Desire – Of all the possible reasons to purchase a home, the simple desire to own a residence of one’s own was easily the most popular with first-time homebuyers. Sixty-four percent of first-time buyers cited that reason, compared with 6 percent for a changing family situation, 3 percent for a job relocation and 4 percent for the affordability of homes.

6. Student Loan Demons – Student loan debt has become one of the main specters haunting for housing today, and NAR’s report did little to assuage those fears. Forty-one percent of first-time buyers reported have student debt, and among those individuals, 31 percent had debts of $50,000 or more. Furthermore, 58 percent of first-time buyers reported that student loans delayed their home purchase, and 22 percent stated that debt of some kind delayed their home purchase for more than five years.

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