First-time Buyers Account for Half of Home Purchases

By:: Kirk Haverkamp | November 08, 2010

Fully half of all homes purchased over the past year were bought by first-time homebuyers, the highest level in at least 30 years of recordkeeping, according to new figures from the National Association of Realtors.

First-time homebuyers accounted for a record 50 percent of all homes purchased during the most recent reporting year, according to the NAR’s 2010 Profile of Home Buyers and Sellers survey. It’s the highest rate since the NAR began tracking the data in 1981, eclipsing last year’s record of 47 percent and the old record of 44 percent set in 1991.

The NAR attributes the high first-time buyer rate to the impact of the homebuyer tax credit program, which expired last spring. The annual survey covers the 12-month period from July 2009 through June 2010.

The median first-time buyer was 30 years old with an income of $59,900 and paid $152,000 for a 1,500 square-foot house. Ninety-three percent qualified for the first-time homebuyer tax credit, which had income and home price limits.

More than six out of 10 first-time buyers used government programs to buy their homes, with 56 percent obtaining an FHA mortgage and 7 percent getting a VA loan. Ninety-five percent chose a fixed-rate mortgage.

The share of first-time buyers who relied upon financial assistance from relatives or friends increased slightly from the 2009 study. Twenty-seven percent said they received a gift, typically from parents, to help meet their down payment, up from 22 percent in 2009. Another 9 percent received a loan from a relative or friend, up from 6 percent the year before.

Nearly three-quarters of all first-time buyers, 74 percent, said they drew upon savings to make their down payment. Eight percent tapped into a 401(k) fund, while another 6 percent sold stocks or bonds.

Typical first-time buyers said they plan to remain in their home for 10 years, compared to 15 years for repeat buyers. With the soft housing market, home sellers were holding onto their homes longer, with the typical seller having occupied their homes for eight years, up from seven years in the 2009 report.

The median repeat home buyer was 49 years old with an income of $87,000 and bought a 2,000 square-foot home for $215,000.

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