First-time buyers want "forever homes" despite affordability, interest rate concerns
In the face of fluctuating interest rates and concerns about affordability, most first-time homebuyers hold an optimistic view of the housing market in 2024, according to a new study by TD Bank.
The study, which drew from a survey of 1,009 Americans intending to purchase their first home in the upcoming year, found that 74% of prospective buyers feel positive about prospects in the housing market.
This optimism is similarly reflected in the fact that nearly all those surveyed (97%) have already taken initial steps towards homeownership.
Additionally, 78% of first-time buyers said their financial situation is stable enough to embark on this significant investment. Additionally, 40% of respondents said that the current moment is a good time to buy a home.
Steve Kaminski, head of US residential lending, also noted the potential for slight relief in interest rates but added that “the financial steps needed to purchase a home should remain top of mind.”
“Rates are central to affordability for many, but with a moderate decline in rates forecasted, buyers will still have to contend with low home supply and relatively high home prices,” he said. “An experienced lender can help consumers navigate the interest rate and housing environment by providing mortgage options that can support their budget and best fit their financial situation.”
First-time buyers want “forever homes” despite interest rate concerns
Despite a potential easing of rates, interest rate concerns still loom large for 63% of respondents.
To address these concerns, nearly half of those surveyed (47%) have begun saving for a down payment, and 38% have set a budget for their home purchase.
Additionally, 40% of first-time buyers said they aim to spend $300,000 or more on their first homes, indicating a 9% increase from last year’s figures.
In terms of property preferences, first-time buyers leaned towards purchasing “forever homes.”
According to the survey, 48% of respondents are seeking a long-term residence, marking a 7% increase from 2023. At the same time, interest in fixer-uppers or starter homes has declined by 7% since last year.
Location was shown to be a crucial factor for first-time buyers, with many wanting to be close to schools, workplaces, and amenities like backyards or pools.
More guidance needed for first-time buyers
The survey also shed light on the financial literacy and awareness of first-time buyers, particularly those with low-to-moderate incomes (LMI).
While the majority of LMI respondents expressed confidence in their understanding of mortgages and the buying process, 46% remain unaware of down payment assistance programs that could ease the financial burden of purchasing a home.
Furthermore, over four in five LMI respondents pointed to the affordability of a down payment (82%) and the affordability of a mortgage plus other monthly expenses (82%) as some of the major obstacles hindering them from initiating the homebuying process.
Regarding these concerns, Kaminski stressed the importance of educating first-time buyers on the resources available to them.
“Educating first-time homebuyers about the resources down payment assistance programs can provide, as well as the associated monthly costs of homeownership, can help them accomplish their dream of owning a home and strengthen their financial position over the long-term,” he said.
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