According to the National Association of Realtors' annual Profile of Home Buyers and Sellers survey, the current housing market is a kinder, gentler environment for first-timers. That result might surprise a few Americans who wonder about the 'when and how' of market recovery. Coupled with uncertainty about the market, first-time home buyers can no longer take advantage of the First-Time Home Buyers' Tax Credit.
Home Buyers
Yet first-time home buyers are buying in this market. Fifty percent of home sales between July 2009 and June 2010 can be attributed to first-time home buyers. Only 47% of home sales in the previous year were made to first-timers.
Why are there so many first-time home buyers - despite the obvious challenges? Apparently, they are getting help from a group referred to often as 'angel investors' – family and friends. These 'angels' are not only encouraging first-time buyers but they are providing down payments.
Family and Friends
According to this recent survey of 8,449 home buyers, 27% of first-time buyers between July 2009 and June 2010 received a gift from family or friends to help with their down payment. That percentage is up by five points over the previous year and now stands at the highest in more than 20 years.
Nine per cent of first-time buyers in this 2010 National Association of Realtors' survey received a loan from relatives or friends. According to NAR, only 6% of first-time buyers in last year's results went that route. The reason why family and friends want to help is a timeless one. It's about family and friends! In fact, a little help extended to loved ones in the housing market is not a new phenomenon. The degree of help – the number of people offering assistance and the number of buyers accepting – is the astounding statistic.
The more eye-popping revelation revolves around why first-timers need help. Is the present housing market so unfriendly to first-time buyers? Actually, without an 'angel' or two at your side, the housing market can be an intimidating place for a home buyer. A study of all types of home buyers looking for a mortgage shows that people find the process to be a difficult one. Forty percent of all buyers and 42% of first-time home buyers were surprised by the complicated challenges encountered along the way.
First-Time Home Buyers – The Challenges
- The First-Time Home Buyers Tax Credit is past its expiry date.
- Even with low mortgage rates, today's homes cost a substantial sum.
- 'No-down-payment mortgages' do not exist in the current marketplace.
- First-time home buyers need a significant down payment – even if they have good credit.
- Banks and lenders have strict standards.
- Financing is a problem if a potential buyer does not have a favorable credit score.
- Lenders have a 'one size fits all' approach – lack of consideration for individual circumstances.
Family and friends step in where lenders leave off and lack of consideration is replaced by consideration and support. Yet the reality is that despite their best intentions, many families and friends are not in a position to help first-time home buyers. This group of first-timers will be examining the housing market carefully before they enter into any transactions. If you have the means and qualifications, however, James J. Driscoll, with Auburn Sherlock Homes Real Estate in Auburn, N.Y., makes a good case for buying a home.
"..If a person's choice was between a $1,000 rent and a $650 mortgage payment, why wouldn't you buy if you're qualified and have the means to make the purchase," says James J. Driscoll, with Auburn Sherlock Homes Real Estate.
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