Not having enough money for down payment is holding 44% of first-timers back
- Nearly two-thirds of millennials and 45% of Gen Z say a desire to be a homeowner is the main reason they are buying a home
- One-third of first-time homebuyers haven't been able to find a home within their budget
- Location tops the list of what prospective homeowners are looking for
- More than half of this year's first-time homebuyers expect some competition; one in five believe they're in for a lot of competition
SANTA CLARA, Calif., March 25, 2021 /PRNewswire/ -- Homeownership is very much a part of the American Dream, even for millennials, long considered "the rent generation," a new realtor.com® survey finds. However, rising prices and a shortage of available homes for sale is making it more difficult for people to achieve their goal.
The realtor.com® HarrisX survey of more than 800 prospective homebuyers who plan to purchase their first home in 2021 sheds light on the aspirations and challenges facing those who are embarking on one of life's biggest financial decisions.
"Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have -- to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families," said realtor.com® Senior Economist George Ratiu. "However, today's first-time homebuyers face unprecedented challenges brought on by a lack of available homes for sale and double-digit price growth. They are resilient though, with many in the market searching for their home for more than a year."
The survey found 43% of those queried have been searching for their home for more than a year. One-third (33%) of the respondents have been in the market between six and 12 months, an indication that buying a home in today's market is not easy. Approximately one in seven -- 14% -- have been searching for three to six months and 10% just entered the market in the last three months.
I want to be a homeowner and build equity
Long considered an important fabric of the American Dream, becoming a homeowner remains the No. 1 reason this year's first-time homebuyers are in the market. Three of the top four responses centered on the financial benefits of owning a home. When asked, "Why are you planning to buy a home?" The top response, at 59%, was "I want to be a homeowner". "I want to live in a space that I can invest in improving" ranked second at 33%, followed by the "need for more space" at 31% and "I want to build equity" at 22%.
Homeownership ranked as the top choice across all generations surveyed -- Gen X and older (40+) at 68%, millennials (aged 24-39) at 62% and Gen Z (18-23) at 45%. Millennials ranked the need for more space second among their reasons for buying a home, while Gen X and Gen Z both cited being able to invest in a property at 34%.
A needle in a haystack
When asked why they have yet to purchase a home, 44% responded that they don't have enough for a down payment and 34% stated that they haven't been able to find a home within their budget. This points to affordability and lack of homes on the market as significant challenges facing first-time homebuyers, especially this year when inventory is at an all-time low and listing prices have been growing at double digits for more than six months.
Millennials -- many of whom have been saddled with student loans -- are struggling the most to save, with 47% responding that the biggest obstacle to finding a home has been coming up with money for a down payment. This also was true for 44% of Gen X and 38% of Gen Z respondents. Millennials also are having the hardest time finding a home within their budget at 37%, followed by 33% for Gen X and 30% for Gen Z.
Location, quiet location...
The old adage when it comes to real estate is it's all about location, and this year's first-time buyers reinforced that. At 38%, location ranked as the top feature potential homebuyers are looking for, followed by a quiet location at 33%, a large backyard at 32% and a garage at 29%.
Gen Z ranked location as their No. 1 choice at 37%, followed by garage at 35% and updated kitchen at 26%. Quiet location and large backyard tied for fourth with the youngest cohort of buyers at 25%. For millennials, location tops the list at 40%, followed by a large backyard at 37% and quiet location at 32%. Potential buyers aged 40 and over are looking for a quiet location (43%), location (35%) and a good community/neighbors (33%).
Despite the popularity of reality home improvement shows, only 11% of this year's first-time homebuyers say they are willing to take on a fixer-upper with 43% indicating they want a move-in ready home. The remaining 46% said they would be willing to take on some repairs.
Searching online, saving are important first steps
When asked what they did first when they decided to purchase a home this year, 29% said they started searching online with nearly a third checking listings at least once a day, if not more. Finances are top of mind for many first-time homebuyers with nearly a quarter (24%) responding that they began saving money and changed their spending habits, while 20% figured out their budget.
The most common way to save is setting aside a certain amount from each paycheck (50%), while 45% said they also cut out discretionary expenses, such as gym memberships and eating out for lunch. Twenty-nine percent put away lump sums from annual bonuses, tax returns and gifts.
With a majority of respondents having been in the market since last spring, they are fully aware of the competition they are facing. Fifty-three percent expect a lot or some competition with one in five first-time homebuyers expecting a lot of competition.
Methodology: Realtor.com® commissioned HarrisX to conduct a national survey of consumers. The total sample size was 830 adults. The survey was carried out online. The figures are representative of all U.S. adults (aged 18+) who were identified as likely first-time buyers. The sampling margin of error of the survey was +/- 3.6 percentage points. Results were weighted for age, gender, region, race/ethnicity and income where necessary to align them with their actual proportions in the population.
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Janice McDill, firstname.lastname@example.org