Buying a home is often an exercise in patience and commitment. At some point in the search or bidding war, you may ask yourself, “How badly do I really want this?”
For some recent home buyers, the answer has been, “badly enough to make concessions” at one end, and “badly enough to blow my budget” at the other, according to data from new BW surveys conducted online by The Harris Poll in January.
“Home buyers have been on a dizzying, twisty journey,” BW home expert Holden Lewis says. “A year ago at this time, mortgage interest rates were low and competition for homes was fierce. Rates moved higher in much of the fall, reducing affordability and knocking some buyers out of the market. Now rates have dropped again. Because so much of the homebuying experience depends on timing and location, it’s not surprising to see a wide array of sentiments across recent and prospective buyers.”
In the 2019 BW Home Buyer Report, we look closely at how much recent American home buyers compromised to make their homeownership dreams a reality and where they could have saved money. We also examine how those recovering from foreclosure feel about owning again, and how many Americans will be shopping for a new home in the coming years.
But first, some increasing optimism: 42% of Americans say they feel better this year about their overall ability to purchase a home compared with a year ago. When we asked the same question in December 2017, just 28% shared that optimistic sentiment. Further, 44% say the current economic and political climate would make them more likely to purchase a home in the coming year, if they were in the market. In the
2018 Home Buyer Report
, just 35% said the same.
Key findings
Upping the ante.
Nearly half (45%) of Americans who’ve purchased a home in the past five years offered more than asking price before having their offer accepted.
Feeling the pinch post-purchase.
One-fourth (25%) of American homeowners say they no longer felt financially secure after purchasing their current home — and more than one-third (34%) of first-time home buyers identified with this sentiment.
Missed savings by the millions.
American home buyers could save $776 million in a single year by
comparing mortgage rates
among lenders before applying, according to BW’s analysis. That’s over $400 per borrower in the first year of a 30-year mortgage.
More Americans looking to buy.
Thirty-six percent of Americans plan to buy a home in the next five years, compared with 32% when we asked in December 2017. Of them, 24% say they’ll be making the purchase within the next 12 months.
Some hesitancy after foreclosure.
Thirteen percent of Americans have lost a home due to a financial event such as foreclosure in the past 10 years. More than 6 in 10 of them (61%) have not bought a home since, and 20% of those who haven’t repurchased say they never plan to again.
Down payment misconceptions.
More than 6 in 10 (62%) Americans believe you must put at least 20% down in order to purchase a home. The truth: 32% of current U.S. homeowners put 5% or less down on their home, according to census data.
Recent market drove concessions and blown budgets
In a seller’s market, home buyers are forced to make compromises in how they shop for a home and what’s on their wish list. Recently, with affordable homes in short supply, buyers have done exactly that.
Six in 10 (60%) Americans who bought a home in the past five years had to make more than one offer before closing, and 37% had to make three or more, according to the survey. This included the home they ended up buying and any others they competed for. On average, these buyers put three offers in before closing.
Not many were successful in getting sellers to come down on price: 45% who recently purchased offered more than asking price before going under contract while 31% had an offer below asking price accepted. One in 10 (10%) offered 10% or more over asking price.
Home buyer takeaway:
You’re not guaranteed the house you want, in the neighborhood you prefer, at a price below your target budget. Go into house shopping with a realistic vision. Get real about your must-haves and what you can be flexible about. And know the market; talk with your agent (or several, if you haven’t chosen one yet) to know just how tight things are in your area.
“I encourage home-shoppers to approach the process in a spirit of discovery,” Lewis says. “You might find your priorities shifting — for example, you might realize that you’re willing to pay more for a smaller place in exchange for a shorter commute. What I’m saying is: Don’t hesitate to change your mind while house-hunting. You’ll go through less stress if you’re flexible.”
First-time home buyers find less wiggle room
For newcomers to the housing market, buying in the past five years was even harder. More than half of recent first-time home buyers (56%) offered more than asking price before having their offer accepted, compared with only 35% who recently bought their second or subsequent home.
Fifteen percent of first-time home buyers found the offers they received to be higher than they were comfortable with, while only 8% of those purchasing their second or subsequent home felt the same way. On average, first-time home buyers made 3.8 offers before having one accepted, compared to 2.5 offers for repeat buyers. First-time home buyers are typically younger and on a tighter budget, making it more challenging to find affordable single-family homes. This can lead to feelings of financial insecurity after purchasing a home, with 34% of first-time buyers experiencing this compared to 17% of repeat buyers. It is essential for home buyers to set a firm budget and avoid going over it, as well as comparing mortgage lenders to save on interest rates. Despite challenges in the housing market, there has been an increase in the number of Americans planning to buy a home in the next five years. Additionally, former homeowners who lost their homes during the foreclosure crisis are considering buying again, with 58% planning to purchase a home in the next five years. Many Americans believe a 20% down payment is necessary to buy a home, but the reality is that most homeowners put down 5% or less on their current home. When exploring your options for a down payment, keep in mind that while a smaller down payment can expedite your path to homeownership, saving up more before purchasing will ultimately ease the burden of your monthly payments.
The surveys conducted among American adults by The Harris Poll on behalf of BW shed light on home buyer trends and experiences. It’s important to note that the surveys are not based on probability samples, so theoretical sampling errors cannot be determined. For further details on survey methodology, please reach out to Maitri Jani at [email protected].
It’s worth mentioning that when referring to Americans who have “recently purchased” homes or are “recent home buyers,” we are identifying individuals who have bought a home within the last five years.
Our calculations on the number of American home buyers who could save were derived from lender comparison data and mortgage originations information. By analyzing potential savings per borrower in the first year based on various factors, we aim to provide valuable insights for prospective homeowners.
The down payment data utilized in our research was sourced from the 2017 American Housing Survey conducted by the U.S. Census Bureau. following sentence: “The cat chased the mouse around the room.”
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