Zero Down Common Among Entry-Level Home Buyers
Forty-three percent of entry-level home buyers made their purchase with no money down in 2005, up from 28% in 2004, according to an extensive National Association of Realtors® survey of consumers who bought and sold homes for the 12-month period running through last July.
Forty percent of the 7,800 consumers who responded to a questionnaire for the “2005 National Association of Realtors® Profile of Home Buyers and Sellers” were first-time buyers; their median age was 32 and their median household income was $57,200.
The median home price for the entry-level group of buyers was $150,000, the Realtors® reported on Jan. 17, and the median downpayment was 2%.
The typical repeat buyer was 46 years old and had a median household income of $83,200, the study found. They placed a downpayment of 21% on a home costing $235,000; 11% of these buyers paid cash for their home.
In all, 94% of the buyers and sellers who were surveyed said that they believed their home purchase was a good financial investment.
“To underscore the value of housing as an investment, all you have to do is look at the difference in how repeat buyers purchase their next home,” said Paul Bishop, the association’s senior economist. “The wealth effect of homeownership provides the greatest source for their downpayment, which is significantly larger.
Other findings of the survey:
- Aside from sellers who paid cash for their new home, 66% used the equity from their previous home for a downpayment.
- The most important factors in choosing the location of the home were: neighborhood quality, 68%; proximity to a job or school, 43%; proximity to family or friends, 36%; and the school district itself, 23%. Seven other factors received responses from less than 20%.
- Married couples made up the largest share of the housing market, accounting for 61% of transactions. Twenty-one percent of homes were purchased by single-women and 9% by single men. Unmarried couples accounted for 7% of the market.
- The typical buyer walked through nine properties and searched eight weeks to buy a home; they moved 12 miles from their previous residence. The typical seller placed their home on the market for four weeks; had lived in it for six years; moved 15 miles to their new residence and had previously owned three homes, including the one they just sold.
- Nine out of 10 home buyers used a real estate agent in the search process, but use of the Internet to search for a home has risen from 2% of buyers in 1995 to 74% in 2004 and 77% in 2005.
- When asked where they first learned about the home they purchased, 24% of buyers identified the Internet, up from 15% in 2004 and only 2% in 1997. Although most buyers used a real estate agent to complete the transaction, 36% first learned about the home they bought from a real estate agent and 15% from yard signs.
“We find that the level of for-sale-by-owners is on a sustained decline and is now at a record low,” said Thomas M. Stevens, the association’s president. “In addition, a growing share of FSBO properties are not placed on the open market — they’re private transactions.”
Only 13% of sellers conducted transactions without the assistance of a real estate professional in 2005, the study found, and 39% of those transactions were “closely held” between parties who knew each other in advance.