First-Time Homebuyers Want to Skip the Starter Home, Shop for the Long Term
Inaugural Bank of America Homebuyer Insights Report Reveals Prospective Buyers Want a Home for Emotional Reasons, Yet Understand the Need to Save for a Down Payment
As peak homebuying season begins, first-time homebuyers are prioritizing their long-term residential needs, according to the inaugural Bank of America Homebuyer Insights Report, released today. Seventy-five percent of first-time buyers would prefer to bypass the starter home and purchase a place that will meet their future needs, even if that means waiting to save more, and 35 percent plan to retire there.
In reality, three-quarters of experienced buyers said they sacrificed something the last time they bought a home, including travel (46 percent) or a new car (37 percent), and 32 percent said they sacrificed some of the features they would have liked in their dream home.
Additionally, buyers who have a plan in place for purchasing a home are more willing to consider a starter home than “someday” buyers who know they want to buy a home in the future, but don’t have a plan for doing so (41 percent vs. 23 percent). Seventy-seven percent of “someday” buyers would prefer to wait and move into a nicer home in the future.
“Every day, we talk to clients who are motivated to purchase a home for many reasons, including the pride of ownership and desire to establish roots in a community,” said D. Steve Boland, Consumer Lending executive for Bank of America. “Today’s aspiring homebuyers want to be selective and believe they should wait until they can afford to buy a home they’ll live in for years to come. They’re also realistic about the need to save for a down payment. In the end, we look holistically at our clients’ life priorities so they can fully understand the personal ramifications of what is perhaps the most significant financial transaction they will ever make.”
The Bank of America Homebuyer Insights Report explores the attitudes, behaviors and preferences of the modern homebuyer. Based on a national survey of more than 1,000 adults ages 18 and older who want to buy a home in the future, the report reveals what homebuyers want in a home, their catalysts for making the home purchase and the unique preferences of first-time and millennial buyers, defined as those between ages 18 and 34.
Highlights from the report include:
- Aspirational and emotional factors motivate more than three-quarters of first-time homebuyers.
- The same number of homebuyers consider saving for or paying off a home (92 percent) as important as saving for retirement (91 percent).
- Two-thirds of first-time millennial homebuyers expect some kind of assistance from their parents when buying a home, ranging from financial support to assistance moving in.
- More than half of first-time buyers are looking for a home in the suburbs.
- Eighty-five percent of first-time homebuyers would use a tool that automatically withdrew money from their paycheck to save up for a home purchase.
First-time buyers are driven by aspiration and emotion
First-time homebuyers are highly motivated by aspirational and emotional factors when making the decision to buy a home. For instance, 52 percent would like a place to call their own, 43 percent said owning a home is something they have always wanted to do, 31 percent are ready to put down roots, and 28 percent want a place to make memories.
Practical considerations also come into play. Thirty-seven percent of first-time buyers said they would rather spend money on a mortgage than rent, 36 percent said they want more space, 17 percent plan to have a child, and 14 percent are getting married.
Experienced homebuyers are similarly motivated by a desire for more space (35 percent), but another 22 percent are buying a new home because of a geographic move.
Aspiring homeowners want to save more, pay off debt before they buy
Half of the surveyed “someday” first-time buyers said they are waiting until they can save more money to buy their desired home or find a home in the neighborhood they want. Forty-seven percent are waiting because they do not think they can currently afford a home or the type of home they would like to buy.
“Instead of concluding they can’t own today, we encourage potential homebuyers to talk to a professional, rather than making assumptions about what type of home or neighborhood they can afford,” said Boland. “We also have tools, such as our Down Payment Resource Center, to help homebuyers develop a plan for saving and making their dream of homeownership a reality.”
Another common reason for putting off a first-time home purchase was the desire to pay down debt. The report found Gen Xers were more likely than millennials to cite debt as a reason for waiting to buy a home (43 percent vs. 32 percent). While many of the millennials surveyed have student debt (43 percent), Gen X homebuyers are balancing multiple financial priorities, such as credit card debt (40 percent), retirement savings (52 percent) and saving for their child’s college education (31 percent).
Saving for a home as important as saving for retirement
More than nine in 10 buyers consider saving for or paying off a home to be important, the same number who said that saving for retirement is important (91 percent).
Nearly three in five first-time homebuyers plan to make a down payment with savings they’ve set aside specifically for a home. Understanding the importance of saving for a home, many first-time buyers said they would appreciate help doing it: 85 percent would use a tool that withdraws money from their paycheck to save for a home purchase.
Millennial homebuyers expect support from their parents
While first-time millennial homebuyers largely associate homeownership with adulthood (58 percent) and success (54 percent), the majority (66 percent) still expect some type of help, financial or otherwise, from their parents when buying a home.
Thirty-one percent expect financial support from their parents or partner’s parents in buying their first home, including help with the down payment (19 percent) or monthly mortgage payments (15 percent). Nearly one-quarter of millennial homebuyers said their parents offered financial help, and 10 percent asked for it. When parents offer to help, it is more common for millennial homebuyers to accept (65 percent) than to decline (35 percent).
Many millennial first-time homebuyers are also counting on non-financial support. More than one in three expects their parents to help them physically move in, and 25 percent will rely on their parents to help them choose the right home to buy.
Some of this assistance comes with strings attached. Seventy percent of millennials said their parents’ help means they will have a say in the buying process, mainly how much to spend on the home (41 percent), as well as where (33 percent) and which home to buy (28 percent).
A single-family home in the suburbs remains the most common goal
When shopping around, today’s buyers consider these four factors above everything else in evaluating a prospective home: cost (82 percent), neighborhood (71 percent), floor plan (60 percent) and square footage (47 percent).
In terms of space, a vast majority (75 percent) of first-time homebuyers are interested in buying a single-family home. Eleven percent of first-time buyers said they would like to purchase a townhome, and 6 percent are interested in a condo.
As for where they are looking to live, more than half (52 percent) of first-time homebuyers are seeking a home in the suburbs, while 26 percent are interested in an urban property and 22 percent in a rural area.
For additional information about the Bank of America Homebuyer Insights Report, please visit www.bankofamerica.com/homebuyersreport.
Bank of America Consumer Lending
Bank of America’s Consumer Lending unit includes Merrill Lynch Banking, Global Wealth and Investment Management Real Estate, Home Loans and Consumer Vehicle Lending. Each business is focused on delivering a distinctive and consistent client experience through competitive product offerings, quality loan production, choice of multiple connection and delivery methods, and operational excellence based on a client’s unique attributes and relationship with us.
About the Bank of America Homebuyer Insights Report
Braun Research, Inc. (an independent market research company) conducted a nationally representative, online survey on behalf of Bank of America January 27–February 21, 2016. Braun surveyed 1,001 respondents throughout the U.S., comprised of adults 18+ who want to buy a home in the future. In addition, comparatively 300 adults were also surveyed in 10 local markets: Atlanta, Boston, Chicago, Dallas, Denver, Los Angeles, New York, San Francisco, Seattle, and Washington, D.C. Braun also interviewed a total of 801 millennials (defined as 18−34 years old) in the national U.S. sample. The n=801 millennials are comprised of n=376 completes that came from the main, national sample. The remaining n=425 were obtained from an oversample of additional millennials to achieve the total n of 801. The margin of error for the national quota is +/- 3.0 percent; about +/- 5.7 percent for the oversampled markets; and about +/-3.5 percent for the national millennial group, with each reported at a 95 percent confidence level.
Bank of America
Bank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,700 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 32 million active users and approximately 19 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
© 2016 Bank of America Corporation. All rights reserved.
Reporters May Contact:
Kris Yamamoto, Bank of America, 1.800.796.8448