Wed, 03 February 2021 | housing economy
A new survey from realtor.com® found that more than two-thirds (68%) of shoppers were surprised by what they could actually afford for their first home. Forty-seven percent were surprised because their budget was larger than they thought, and 21% were surprised because it was less.
"The dramatic decline of mortgage rates in 2020 was a pleasant surprise for many buyers," said realtor.com® Senior Economist George Ratiu. "For first-time buyers, especially, the drop in the 30-year mortgage rate from 3.65 percent in March 2020 to a record-low of 2.65 percent in January has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same."
To get what they wanted in their first home, many recent buyers had to compromise. Twenty-one percent had to expand their search into less expensive neighborhoods. Twenty percent had to go up in budget to get it all, and 18% had to eliminate some wish list features -- namely a garage, large backyard, finished basement, and pool -- to stay in budget.
Even with shortened wish lists or expanded budgets, nearly half (49%) of recent first-time homebuyers and more than a third (39%) of prospective first-time homebuyers said they fell in love with a home last year that they were outbid on or later learned they couldn't afford. It happened more than once too: 20% of recent first-time homebuyers were outbid on at least one home they wanted, and 20% made five or more offers before finally getting a home.
"You have to know what you can afford before you head too far down the homebuying road," said realtor.com® Home and Lifestyle Expert Lexie Holbert. "Putting pen to paper and getting a real sense of your current monthly expenses and what you're saving each month is a good place to start when thinking about your mortgage. Especially as a first timer, it's really important to stick to your budget when searching online so you don't fall in love with something you can't afford. Using the monthly mortgage payment filter on realtor.com® can help you be sure you're only looking at homes within your price range."
For the 44% of Americans who've been planning to buy but don't have enough for a down payment, their first home might be closer than they think. Half of recent first-time home buyers were able to save for a home in less than three years, mostly by setting aside a portion of their paycheck each month (50%), cutting out discretionary spending (33%), and saving lump sum money like tax refunds (32%). Plus, help from family could get you there: 52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. The number one lender? Their parents.
For more details, see the full report at https://www.realtor.com/research/first-time-home-buyers-housing-2021.
Source: Realtor.com