Profile of Today’s First-Time Home Buyer

Blog posted On September 26, 2019

Do today’s first-time home buyers look drastically different from the first-time home buyers of twenty years ago?  In some ways they do but in many ways they don’t.  Harvard University’s Joint Center for Housing Studies analyzed over twenty years of housing data from the Department of Housing and Urban Development and American Housing Surveys to evaluate what today’s first-time home buyers look like, what trends have persisted, and what’s new.

Down Payment Struggles

Saving for the down payment on a home is one of the biggest obstacles to buying a home today.  With home prices rising, student debt not going away, and pervasive underemployment, many Millennials are struggling to transition from renting to homeownership.  A Bankrate survey of 2,582 US adults found 53%* of Millennials used their own savings to buy a home, 33% used gifts from family or friends, and 33% used down payment assistance.  Another 13% used retirement savings, 14% cut costs and saved money by moving in with family and friends, and 12% resold personal items.  Bankrate mortgage analyst Deborah Kearns explained, “They’re trying to exhaust all their options, and they’re certainly doing that at higher levels than other generations.”

Although the 20% down payment is not required to purchase a home, many first-time home buyers are unaware of the options they have.  FHA Loans are available with anywhere from 3.5% to 10% down, depending on the buyer’s credit score and other financial factors.  VA Loans are available with no down payment to qualifying Veterans and active-duty military, and allow closing costs to be financed.  Some conventional loans have down payment requirements ranging from 3% to 5% depending on the buyer’s financial profile.  Talking with a loan officer ahead of your home purchase can allow you to set an achievable down payment goal.  You may be able to buy a home sooner than you think.

*The figures do not equal 100% as respondents were able to select more than one option.

Not Waiting for Marriage and Family

In 1997, the median age of a first-time home buyer was 32.  By 2017, the median age of a first-time home buyer had only jumped to 34.  The age of today’s first-time home buyer has not increased dramatically, but the varying demographics have.  First-time home buyers are more diverse and not confined to the marriage, family, home buying path they typically followed two decades ago.  

Harvard University’s Joint Center for Housing Studies study found a larger share of new homeowners bought their homes before getting married.  In 1997, 61% of first-time home buyers were married, and in 2017 less than half of first-time home buyers were married, and 35% had never been married.  First-time home buyers are buying homes alone, with an unmarried partner, and with siblings or friends. 

Buying Bigger

Because Millennials are delaying homeownership, many first-time home buyers are buying bigger homes than the previous first-time home buyers.  Rather than purchasing a smaller starter home and moving up to a larger home later, first-time home buyers are buying bigger to begin with.  Many markets are struggling with not enough homes for sale, and first-time home buyers would rather buy a home they can live in for many years rather than having to re-enter a competitive housing market again when they get married or have children and need more space. 

Today’s first-time home buyers are not all that different from the first-time home buyers of twenty years ago.  They are facing steeper barriers in saving for a down payment, but the housing industry is finding new ways to facilitate buying a home.  If you’re getting ready to buy your first home or even just thinking about it, let me know.  I would be happy to design a home buying plan for you. 

Sources: CityLab, MarketWatch