SANTA CLARA, Calif., Feb. 3, 2021 /PRNewswire/ — For first-time homebuyers looking to buy in 2021, a new survey from realtor.com® indicates that getting finances in order is a critical place to start. Almost half (47%) of those who bought their first home last year — successfully making it through the most competitive market in recent history — turned to their finances before they did anything else.
More than two-thirds of recent buyers were surprised by what they could actually afford
According to a survey of 1,000 recent and prospective first-time homebuyers in the U.S., conducted online from Jan. 7-11 by realtor.com® via HarrisX, 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.”
Compromising on wish list features, or budget, is key
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.
With competition high, getting outbid is to be expected… multiple times
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.”
Savings, and help, could mean a downpayment is closer than prospective buyers think
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.
Realtor.com® makes buying, selling, renting and living in homes easier and more rewarding for everyone. Realtor.com® pioneered the world of digital real estate more than 20 years ago, and today through its website and mobile apps is a trusted source for the information, tools and professional expertise that help people move confidently through every step of their home journey. Using proprietary data science and machine learning technology, realtor.com® pairs buyers and sellers with local agents in their market, helping take the guesswork out of buying and selling a home. For professionals, realtor.com® is a trusted provider of consumer connections and branding solutions that help them succeed in today’s on-demand world. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. under a perpetual license from the National Association of REALTORS®. For more information, visit realtor.com®.
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