First-time buyers are often faced with several barriers to homeownership including student loans, down payment savings, and balancing multiple financial priorities, but they ultimately express a desire to own a home.
Bank of America's inaugural Homebuyer Insights Report, which surveyed 1,001 adults throughout the U.S., found that when it comes to purchasing a home, first-time buyers' views toward homeownership vary but they do want to buy a home.
First-time buyers want to skip the starter homes, Bank of America reported. The report showed that 75 percent of first-time buyers want to skip the starter home for something that fits their future needs, even if it means waiting longer and saving more. Meanwhile, 25 percent of respondents indicated that they would rather buy a home that fits their needs now, but not necessarily later in life.
Survey respondents noted three reasons for not purchasing a home yet: Can't afford a home or the type of home they want (56 percent), paying off debt (34 percent), and don't need a home yet (28 percent).
"The reality is that many buyers today are balancing important financial priorities. To them, saving for a home is as important as saving for retirement. And they are considering all of this while they are coping with student loans, credit card debt and college savings for their children," said D. Steve Boland, Consumer Lending Executive at Bank of America. "That’s likely why the majority of aspiring buyers are expecting some type of support from their parents in buying a home."
According to the survey, 43 percent of Gen-Xers (ages 35-49) have put off purchasing their first home because of debt compared to 32 percent of millennials (ages 18-34). The survey noted that Gen-X homebuyers are balancing a variety of financial situations, including retirement savings (52 percent), credit card debt (40 percent), and saving for their child’s college education (31 percent).
"The reality is that many buyers today are balancing important financial priorities."
Steve Boland, Bank of America
Bank of America reported that more first-time buyers are motivated by emotional factors (76 percent) than financial factors (63 percent) when making the decision to buy a home. In addition, homebuyers said that they define homeownership as security (60 percent), responsibility (58 percent), family (58 percent), and happiness (57 percent).
"Homebuyers today are motivated by both emotional and practical reasons. Nearly all want more space, but a majority of homebuyers, especially those purchasing their first home, are also looking for a place to call their own, put down roots and make memories," Boland explained. "They value the emotional benefits of owning a home as much as the financial ones."
First-time buyers indicated in the survey that they plan to make a down payment in the following ways: set aside savings for a home (59 percent), a loan from another source (40 percent), savings which were not set aside fro anything specific (19 percent), anticipated raise/bonus from work (9 percent), and financial windfall (6 percent).
"The dream of homeownership is alive and well. Homeownership is still an important goal, and individuals see their home—and the equity they build in it—as an important cornerstone of their everyday life and their overall financial picture," Boland noted. "The path to homeownership is a journey and can be as overwhelming as it is exciting. For many people, this is the single most significant financial transaction they will ever make."