As mortgage interest rates slowly tick down, who are today’s home buyers and what motivates them to make a purchase?
A recent National Association of Home Builders analysis of the latest American Housing Survey provides insight into recent home buyers and the home buying process. Conducted in odd-numbered years by the U.S. Census Bureau, the 2021 AHS studied 10.2 million households that bought a home in the previous two years.
Of these households, 40% were buying their first home, while 7% were purchasing a new home. In general, new home buyers are older, make more money, and are purchasing bigger, more expensive homes. On the other hand, first-time home buyers are younger, make less money, and are purchasing smaller, less expensive homes.
Home buyers said the top two reasons for choosing a home were “for a better home” (60%) and “a better neighborhood” (49%). Household formulation was third. More first-time home buyers reported forming a new household as the top reason for moving compared to buyers who purchased new homes seeking a better neighborhood.
The survey also asked about the size of homes and found that newly built homes tend to be larger. Nearly a quarter (24%) of new homes were between 1,500 to 1,999 square feet, and 23% were between 3,000 to 3,999 square feet. Compared to newly built homes, homes purchased by first-time buyers tend to be relatively smaller, with 31.6% homes between 1,000 to 1,499 square feet. The median size of new homes is 2,334 square feet, while the median size of homes bought by first-time buyers is 1,669 square feet.
Saving money to purchase a home is an important part of the process. The survey results provided insights on how much money buyers allocated to downpayments. NAHB analysis found that half (50%) of all buyers had a downpayment of 0 to 20%. Only 18% purchased their home without a downpayment. Among all recent home buyers, first-time buyers had relatively smaller down payments. A majority (82%) of first-time home buyers put no more than 20% down.
As single-family home construction expands this year and interest rates become favorable, many individuals and families may start planning to buy a new home.
Mike Thomas is 2024 president of the Building Industry Association of Stark & East Central Ohio.