A large pool of first-time home buyers provide liquidity to the housing market and make it easier for existing owners to trade up or trade down, according to a new survey released by the National Association of Realtors.
First-time home buyers account for four out of 10 home purchases. David Lereah, NAR’s chief economist, said the market share of first-time buyers has been stable since 1993.
“Strong activity by entry-level buyers has provided solid and substantial growth to the housing market over the last decade,” Lereah said. “The demographics of our country favor this trend going forward because echo-boomers, the children of the baby boom generation and almost as large, will be in the prime years for buying a first home for the next decade. These findings demonstrate a fundamental underlying demand that will be driving the housing market at a higher plateau for the foreseeable future.”
The typical first-time buyer is 32 years old, has a household income of $54,500 and makes a down payment of 3 percent on a home costing $139,000. The typical repeat buyer is 45 years old with a household income of $79,100 and places a down payment of 22 percent on a home costing $209,000. In all, 94 percent of buyers believe their home purchase is a good financial investment.
The 2004 National Association of Realtors Profile of Home Buyers and Sellers is based on transactions from mid-2003 to mid-2004. NAR mailed a six-page questionnaire to a national sample of 100,000 recent home buyers who purchased their homes between mid-2003 and mid-2004 based on county records. It generated a response rate of 8.2 percent.
Buyers are finding agents the traditional way: 44 percent were referred by a friend, neighbor or relative, 13 percent used an agent from a previous transaction and 8 percent saw contact information on a “for sale” sign. Seven percent found an agent on the Internet, 6 percent met at an open house and 5 percent each walked into a real estate office or were referred by another agent or broker. Five other categories accounted for smaller shares each.
The survey found that the most important factor in choosing an agent was reputation, according to 42 percent of buyers, followed by that agent’s knowledge of the neighborhood, 24 percent. Of buyers who use an agent, 64 percent choose a buyer representative.
The survey also found that satisfaction with real estate agents is very high, with knowledge of the purchase process, knowledge of the local market, knowledge of the local area, people skills and responsiveness each generating responses of “very satisfied” by eight out of 10 buyers. Eighty-four percent said they were likely to use the agent again or recommend theirs to others.
Seller responses were fairly comparable, with eight out of 10 selling through a real estate agent. Thirty-eight percent chose agents based on a referral by a friend, neighbor or relative and 31 percent used the agent previously. Fifty-four percent said reputation was the most important factor in selecting an agent, followed by their knowledge of the neighborhood, coming in at 19 percent. Eighty-two percent said they were likely to use the same agent again or recommend to others.
Married couples continue to dominate the housing market, accounting for 62 percent of transactions through the first half of 2004. Single women purchased 18 percent of homes while single men made up only 8 percent of the market. Unmarried couples were 9 percent, and 2 percent were listed as other.
The typical buyer walked through nine homes, searched eight weeks to buy a home and moved 18 miles from their previous residence, while the typical seller placed a home on the market for four weeks, had lived in that home for six years and previously owned three homes, including the one just sold.
Existing homes are the lion’s share of the market, accounting for 79 percent of transactions, while new homes make up 21 percent of purchases.
Buyers use a wide range of resources in searching for a home. Ninety percent use a real estate agent; the Internet and yard signs were used by 74 percent each, newspaper ads, 53 percent, and open houses, 51 percent. Five other categories were used by less than 50 percent each.
When asked where they first learned about the home purchased, 38 percent of buyers said a real estate agent, 16 percent a yard sign, 15 percent the Internet, 7 percent from a friend, neighbor or relative, 7 percent from a home builder, 5 percent from a newspaper ad, 5 percent knew the seller, and 2 percent from a home book or magazine. Other categories totaled 4 percent.
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