The inaugural CENTURY 21® First-Time Homebuyer Index offers some interesting contradictions. First-time homebuyers are getting younger and say their dream home is a brand-new suburban home in the southern U.S., yet the most popular destinations for real-world homebuyers are older homes in urban-oriented New York, Los Angeles and Chicago, near family, friends and jobs.

The survey of 1,214 first-time homebuyers conducted by International Communications Research on behalf of Century 21 Real Estate, LLC suggest that homebuyers dream big, which could play a part in why homeownership has reached nearly 70 percent in recent years.

Not surprisingly, most respondents (78 percent) want a new home, because new construction is "more appealing" to younger respondents (83 percent for those aged 18 to 34, compared to 68 percent for those aged 35 to 64).

When imagining where their "dream home" would be located, more respondents prefer suburban areas (46 percent) to rural (39 percent) or urban (15 percent) somewhere in the southern United States. Most popular with homebuyers was the southeast with 27 percent of the vote, followed closely by the southwest at 23 percent. The Northeast (19 percent), Midwest (17 percent) and Northwest (14 percent) weren't as popular, with the exception of a few northern cities.

Yet the respondents weren't totally living in a dream world. They recognized that it would be a challenge to get into the home of their dreams. Almost two-thirds of respondents (64 percent) believe it will take them more than five years to save the money needed to purchase their dream home. Only three percent of respondents said they were already living in their dream home.

"Ideal" Cities

Friends and family members were a powerful incentive to choose an ideal city for respondents. Among other reasons a city would be "ideal" were:

• Reputation as a great city to raise a family (26 percent) in part due to highly regarded school systems and low crime rates

• Climate (22 percent)

• Proximity to water, sand and mountains (22 percent)

• Strong local economy with many job opportunities (16 percent)

The "Real" First Home Purchase

According to survey respondents, the average length of time it took to find a first home is just over six months, with the quality of local schools a primary concern. Nearly half (48 percent) of respondents expect to move out of their first home in less than seven years.

In contrast to their dream homes, 73 percent of first-time homebuyers said they looked for resale homes while only 27 percent sought out new construction.

The top reasons for buying a first home include:

• Need more room/space (36 percent)

• Desire to build equity (24 percent)

• Marriage (12 percent)

• Need for privacy (10 percent)

• Job relocation (four percent)

Affordability for first-time homebuyers continues to be a problem. The survey found that 78 percent of respondents paid or expected to pay less than $250,000 for their first home. The average first home price among respondents was $215,000.

Over one-quarter (28 percent) of respondents did/will receive help with the down payment from family members. Of those accepting help from others, 63 percent will look to their parents, 17 percent will go to their in-laws, while seven percent will receive help from their grandparents. Fifty-six percent of surveyed respondents put down or planned to put down less than 20 percent of the home purchase price. Respondents from the Northeast made the largest down payments on average than any other region of the country (17 percent versus 14 percent in the Midwest and South and 15 percent in the West).

The National Association of Realtors First-Time Homebuyer Affordability Index shows a typical first-time buyer household, aged 25 to 44, with an income of $32,433, had 70.1 percent of the income needed to purchase a typical starter home in the second quarter with a 10 percent down payment. The median starter home price was $177,200, during the second quarter; the typical first-time buyer could afford a home costing $124,200.

"The index number doesn't tell the whole story," says an NAR official. "For example, our survey data shows the median down payment by first-time buyers is only 3 percent, and more than 4 out of 10 are purchasing with no money down. In addition, about a quarter of first-time buyers who make down payments are receiving gifts from their parents."

When the index was created in the early 1980s, the median first-time buyer down payment was 10 percent.

Published: November 15, 2005

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