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Fewer home buyers believe in their home purchase as a good investment

2011 buyer trends

The 2011 National Association of Realtors® Profile of Home Buyers and Sellers recently surveyed 5,708 home buyers and sellers and discovered that most buyers fund their downpayment with their own savings, and for those who felt they had to make sacrifices to buy their home, it was mostly luxury spending that was sacrificed. Many buyers found the process to be more difficult than they had anticipated with only 16 percent saying it was easier than they anticipated.

What type of mortgages are trending?

Fully 95 percent of buyers this year chose a fixed rate mortgage, up three percent from the previous year and for the 5 percent who chose an adjustable rate mortgage, a fixed- then adjustable product was twice as common, according to NAR. It was no surprise that first time buyers were less likely to choose adjustable rate loans.

Over one in three buyers reported using a FHA loan with conventional loans remaining the most common type selected. First time buyers were more likely to seek FHA financing, with NAR noting that this is “in part due to the restrictions and eligibility requirements for FHA loans.” Half of all first time buyers chose FHA loans, and of repeat buyers shift away from FHA loans, use of conventional financing for this segment rose 6 percent from last year.

Faith in real estate as an investment

Although most (78 percent) home buyers see their home as a good financial investment, as good of an investment or a better investment than stocks. This number has dropped 6 percent from last year and 8 percent from the year prior. Nearly one in ten buyers felt that their home purchase was not a good investment.

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One trend reversed itself this year in that usually, repeat home buyers have a more positive outlook on the investment value of their home, but this year, first time buyers were more positive than repeat buyers.

The takeaway

Most consumers used fixed rate mortgages this year, even more than last year, and half of all first time buyers chose FHA financing. While most buyers believe their home is a good financial investment, this number declined quite a bit this year with 8 percent believing their home purchase was not a good investment. This year, first time buyers had more faith in their purchase as a good investment than repeat buyers, a major trend reversal.

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