ST. LOUIS–The majority of homebuyers over the past few years said they were forced to make compromises in both their purchases and their financing when it came to finding their dream homes, according to a new survey.
The challenging conditions for buyers during the last few years of the pandemic only added more stress to what is already a stressful experience for many, the survey by Anytime Estimate found. Seventy percent of homebuyers in 2021 and 2022 were first-timers, and of those 66% were Millennials.
“In their desperation to become homeowners, first-time buyers were more likely than repeat buyers to take financial risks,” said Anytime Estimate in releasing its findings. “For example, new buyers have been saddled with higher rent and haven't benefited from rising home values, but they were willing to spend more on their home purchases.”
First-timers paid a median of $510,000 for a home in 2021 and 2022 — about 13% more than the $450,000 that repeat buyers paid.
“To cope with these high prices, new buyers were 8% more likely to make compromises on their home purchase. But in the Wild West of home buying, even repeat buyers struggled to lasso a deal,” the company said. “Overall, nearly one-fourth of all buyers (22%) weren't satisfied with the home-buying experience.”
The Struggle
After previously buying in "normal" market conditions, repeat buyers were 75% more likely than new buyers to be dissatisfied, but the market left much to be desired among first-timers who struggled to find affordable homes, according to Anytime Estimate.
“We found that 88% of respondents said the competitive housing market impacted their home-buying experience, with buyers responding by increasing their budgets (38%) and fast-tracking their plans to buy a home (36%) before prices — and interest rates — rose even higher,” the company said.
The Findings
Among the findings:
- 1 in 3 Buyers Paid Over Asking Price for Their Home. The survey found one-in-three offered 1%–10% over the asking price; one-in-four offered 11%–20% over the asking price, and in one-in-three offered 21%–30% over the asking price. The median amount paid over the listing price was $65,000.
“Paying over the asking price is 11% more common among first-time buyers, who are also more likely than repeat buyers to offer more. First-timers paid a median of $77,500 over the listing price, while repeat buyers offered $60,000,” Anytime Estimate said.
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80% of Buyers Made More Than 1 Offer. “With so much competition, even buyers who offered thousands of dollars over asking price experienced rejection,” the company said.
“Approximately 80% of buyers in 2021 and 2022 made more than one offer on a home before theirs was accepted.”
Of those who submitted multiple offers, 41% made an offer on five or more homes, and one in 10 made an offer on 10 or more homes.
- 1 in 3 Buyers Submitted an Offer on a Home Sight Unseen. “Homes have sold at a rapid pace over the past two years. To move quickly, more than one-in-three buyers (36%) made an offer on a home without seeing it in person first, the survey found.
- Fixer-Uppers Weren't Always a Bargain. “After price, the second most common compromise among buyers was purchasing a home that needed significant repairs. More than half of buyers (55%) in 2021 and 2022 opted for a fixer-upper,” Anytime Estimate said. “Of those, about 75% were first-time buyers, including many millennials. Among that generation, 82% of members said they'd buy a fixer-upper, and 56% actually did…Buyers who purchased a fixer-upper reported spending more than the average buyer. The price per square foot for a fixer-upper cost $187, while a home in good condition cost $163 per square foot.”
- 3 in 4 Buyers Have Regrets About Their Home Purchase. Compromising on their priorities inevitably led to regret among nearly three-fourths of home buyers (72%), according to Anytime Estimate. “Spending too much money was the No. 1 regret, with 1 in 3 (30%) saying they overspent. This was a common sentiment among first-time buyers, who were 21% more likely than repeat buyers to feel remorse,” the company found. “The second most common regret was speeding into the home-buying process without pausing to consider the financial implications or ensuring the home was a good fit.”
- One in 10 Buyers Paid in Cash. Buyers who offered the highest price didn't always seal the deal. Sellers looking to close fast and with fewer risks were keen to accept all-cash offers, Anytime Estimate said. “About one-in-10 respondents paid all cash for their home. Of those, more than one-third (37%) were repeat buyers, making them nearly 1.5x more likely than first-time buyers to pay in cash. Among all-cash buyers, nearly half (43%) said they make enough income to do so. That's an impressive feat, considering home prices have soared by 118% since 1965, while income has only increased by 15%.”
- 40% of Buyers Put Down 20% or Less on a Home. “Saving for a down payment is a looming barrier to homeownership, and nearly 40% of buyers put down less than or equal to the standard 20%,” the company said. “Although repeat buyers were more likely to pay in cash, first-time buyers took a different approach to make their offers more attractive to sellers.New buyers who were financially able put down more than 20%, not only to reduce the total cost of the loan, but to signal to sellers that they'd credibly qualify for a mortgage.”
The full survey can be found here.
Separately, the New York Fed has just released a new tool that allows visitors to see home price changes by county. The tool can be found here.
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