According to a recent MReport, most first-home shoppers misunderstood what they were able to afford. Realtor.com conducted a survey to determine what shoppers were surprised about when they bought their first home. 47% were surprised because their budget was larger than expected, and 21% found their budget was less than expected. The survey discovered that 68% of first home shoppers were under-informed about their financial situation. George Ratui, Realtor.com Senior Economist, stated “The dramatic decline of mortgage rates in 2020 was a pleasant surprise for many buyers. For first-time buyers, especially, the drop in the 30-year mortgage rate from 3.65% in March 2020 to a record-low 2.65% in January has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same”.
WHAT ELSE DID THE SURVEY FIND?
The report included that the majority of first-home shoppers are millennials. Within this demographic, there are several factors that go into affordability. The first is the willingness to compromise. 21% of those surveyed stated they raised their budget to get everything on their wish-list. 18% stated they had to eliminate wish-list features such as a large backyard or a pool. The second factor is the ability to endure a bidding war. A large amount of first-time homebuyers stated that they wanted a home but were outbid. Finally, support from family plays a role in affordability. Out of those surveyed, 52% bought their first home in 2020 said they received help with their down payment from friends or family.
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