First-Time Homebuyers Set Record Share of Purchases

By:
Kara Johnson | November 16, 2009

A record 47 percent of all home purchases in the past year were first-time homebuyers, according to a new survey of home buyers and sellers by the National Association of Realtors.

A combination of an $8,000 tax credit, high affordability and pent-up demand brought a record share of first-time buyers into the market, according to Paul Bishop, NAR vice-president of research. The NAR defines affordability as a combination of mortgage interest rates and median home prices relative to median national incomes.
 
 “These (first-time) buyers are critical to housing and a general economic recovery because the market always heals from the bottom up,” Bishop said. “They absorb inventory, free existing owners to make a trade and stimulate related goods and services.”
 
The 47 percent mark exceeded the previous high of 44 percent set in 1991 and a 6 percent increase over last year, when 41 percent of all home purchases were by first-time buyers. The NAR has been tracking the data since 1981.
 
Nearly two-thirds of all first-time buyers used some sort of federal loan program, according to the NAR, with 55 percent using an FHA mortgage and another 8 percent relying on a VA loan. First-time buyers said they plan to stay in the homes a median of 10 years.
 
The median age of first-time buyers was 30, and their median purchase price $156,000, down from $165,000 in 2008. Of those making down payments, 61 percent used savings, but 22 percent relied on a gift from a friend or relative, typically parents. Another 6 percent used a loan from friends or parents. FHA mortgages require as little as 3.5 percent down and the VA still offers zero-down payment loans.
 
The typical repeat buyer, on the other hand was 48 years old, earned $88,100, purchased a home costing $224,500 and plans to stay in that home for 12 years.
 
Despite tightening credit over the past year, 15 percent of all home buyers were still able to make their purchases with no money down, compared to 23 percent in 2008. The median down payment was 8 percent of the purchase price. Eight percent of buyers paid all cash for their homes.
 

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