By Nathan Walldorf, ABR, GREEN, GRI, SFR, e-Pro
President, Greater Chattanooga Association of REALTORS®
Those of us in the real estate industry constantly monitor interest rate activity and rate predictions from economists. In addition to rates, it’s important to consider the financing options and activities of today’s home buyers.
The National Association of REALTORS®’ 2015 Profile of Home Buyers and Sellers provide some insight into recent trends as related to financing the home purchase. According to the Profile, there was shift in home buyer demographics over the last four years. While the median age of home buyers held steady at 44 years old, the median household income rose again from $84,500 to $86,100.
In looking at that income figure, it’s no surprise that the majority of home buyers seek financing in lieu of paying cash for the full purchase price. Yet, I wondered, how much of the purchase is being financed? Who is obtaining financing? Where are the funds coming from? Luckily, NAR’s Profile provided these insights:
- Eighty-six percent of recent buyers financed their home purchase. Those who financed their home purchase typically financed 90 percent of the purchase price.
- First-time buyers who financed their home financed 94 percent of their home compared to repeat buyers at 86 percent.
- For 60 percent of buyers, the source of their downpayment came from their savings. Thirty-eight percent of buyers cited using the proceeds from the sale of a primary residence was the next most commonly reported way of financing a home purchase.
- Forty-six percent of buyers saved for their downpayment for six months or less.
- The most difficult step in the home buying process was saving for a downpayment, as cited by 13 percent of respondents.
- Of buyers who said saving for a downpayment was difficult, 51 percent of buyers reported that student loans made saving for a downpayment difficult. Forty-seven percent cited credit card debt, and 35 percent cited car loans as also making saving for a downpayment hard.
- Buyers continue to see purchasing a home as a good financial investment. Eighty percent reported they view a home purchase as a good investment.
Ready to take the leap into home ownership? Already a home owner but finding it’s time to downsize or upsize? Contact a REALTOR® today to start the conversation and explore your options.