First-Time Home Buyers Outnumber Repeat Buyers
Despite the down payment obstacle, first-time home buyers continue to dominate the housing market. For the past decade, first-time home buyers have comprised the largest share of home buyers, even though affordability concerns, specifically related to the down payment, have caused many would-be first-time home buyers to delay home purchase.
Based on data from the Federal Housing Administration and the Urban Institute, first-time home buyers made up 83% of FHA loan originations and nearly 50% of conventional loan originations. The share of repeat home buyers has declined marginally, since peaking earlier in the century. From 2001 to 2007 repeat home buyers purchased 1.4 to 1.8 million homes each year, but this year they have only purchased approximately 1 million homes. The Urban Institute explains that falling home prices during the Recession may have caused some homeowners to lose home equity. Since then, home equity has rebounded to historic highs, as homeowners choose to occupy their homes longer, limiting the amount of for sale inventory.
Even with home values rising, first-time home buyers are finding creative ways to accumulate the money for a down payment and enter the market. A home is the first appreciating asset many Americans will own and the first step toward building wealth in the form of home equity. “The desire remains strong,” said Lawrence Yun, chief economist at the National Association of Realtors (NAR). “About 80 percent of renters, especially millennials, indicate they would like to own at some point in the future.”
Savvy first-time home buyers are taking advantage of the 2,000+ down payment assistance programs and numerous low down payment mortgage loans available to help them reach their goal of homeownership. Down Payment Resource, an online database of down payment assistance programs, estimates that 87% of homes nationwide are eligible for some type of homeownership assistance program. Renters looking to become first-time home buyers could consider these options:
- FHA Loan – popular amongst first-time home buyers because of its down payment requirements as low as 3.5% and lenient credit standards. The FHA Loan is a government-sponsored loan and will require a Mortgage Insurance Premium up front and throughout the life of the loan.
- VA Loan – available to qualifying active-duty military, veterans, and surviving spouses. VA Loans do not require a down payment and home buyers have the option to finance closing costs.
- USDA Loans – limited to certain rural and suburban regions. USDA Loans do not require a down payment and have the option to finance the 1% origination fee.
- HomeFundMeTM – the first and only down payment crowdfunding platform. Home buyers raise money from friends and family through the online service. All funds are documented with the proper digital gift letters and safely stored in escrow until home purchase.
Since 2014, the gap between first-time home buyers and repeat home buyers has continued to grow, signaling housing market strength. If you are a first-time home buyer and you’d like to review your down payment assistance options, consult a local housing counselor or mortgage loan officer.