First-Time Buyers Feel Prepared To Enter The Market Despite Affordability Pressures

First-time homebuyers are feeling ready to enter the market, despite facing high prices, rates, and competition.

TD Bank’s First-Time Homebuyer Pulse surveyed more than 1,000 Americans planning to buy a home in 2023 on their perception of the market and feelings of preparedness.

Of that group, 54% say they are now better off financially than they were two years ago. Just under 40% think it’s a good time to buy regardless of broad affordability pressures.

They are conscious of market pressures, and many are choosing to buy a fixer-upper or starter home, specifically looking for lower-priced properties. But the majority feel that homeownership is a good long-term investment and showed signs of financial preparedness such as saving for a down payment.

Still, even this optimistic cohort has reservations about the current landscape. A majority expressed concerns about the economy overall, and 64% worried about their ability to afford a home if rates rise.

Rising expenses seem to have played a major role in pushing these buyers into the market.

Nearly two in five renters have considered delaying their home purchase because of interest rates. But of those who have not considered delaying, rent prices were a big reason they decided to forge ahead.

“Even as rates have risen in comparison to the historically low-interest rate environment many experienced in the past two years, buyers see the importance of building equity in a home purchase,” said Steve Kaminski, Head of U.S. Residential Lending at TD Bank.

“Homeownership has and continues to be a sustainable way to build intergenerational wealth, while providing the added benefit of shoring up a buyers’ financial position over the long-term.”

First-time buyers have been deeply impacted by the challenges of the last few years.

They are now fewer and older than ever, making up only 26% of all buyers in 2022, down from 34% the year prior.

“Those who have housing equity hold the cards and they’ve fared very well in the current real estate market. First-time buyers are older as a result of saving for down payments for longer periods of time or relying on a generational transfer of wealth to propel them into homeownership,” Jessica Lautz, NAR vice president of demographics and behavioral insights, said of the trend.

Many lenders are offering down payment assistance, rate-buy downs, and other incentives in an attempt to sway first-timers who have been pushed out of the hot housing market.

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