CHERRY HILL, N.J.— Despite lingering concerns around affordability and interest rates, most first-time homebuyers still feel optimistic about the housing market in 2024 and are ready to spend, according to an annual study from TD Bank.
With home prices temporarily edging downward following their all-time high in 2023, according to the January Case-Shiller Index, TD’s Annual First-Time Homebuyer Pulse found that of those looking to buy a home in the next year, nearly three in four (74%) respondents felt optimistic about the housing market. And nearly all (97%) have already started taking initial steps in the homebuying process.
TD Bank surveyed 1,009 Americans planning to buy their first home in 2024 to gather insights around their feelings on the current housing market, as well as their thoughts on overall preparedness regarding home inventory and the costs associated with purchasing a home.
Economic conditions still pose concerns but buyers remain positive
Perhaps with a renewed hope for lower rates coming mid-2024, 40% of respondents agreed that right now is a good time to buy a home. Additionally, more than three quarters (78%) of first-time homebuyers felt their personal financial situations are in stable condition in 2024.
“Based on the industry consensus, homebuyers can potentially look forward to rates easing a bit, but the financial steps needed to purchase a home should remain top of mind, with one of the most important being to speak with a mortgage professional early in the process,” said Steve Kaminski, head of U.S. Residential Lending at TD Bank. “Rates are central to affordability for many, but with a moderate decline in rates forecasted, buyers will still have to contend with low home supply and relatively high home prices. An experienced lender can help consumers navigate the interest rate and housing environment by providing mortgage options that can support their budget and best fit their financial situation.”
Though some lowering of interest rates in 2024 seems imminent, nearly two-thirds (63%) of first-time homebuyers cited rates as a concern about their ability to afford a home in today’s market. This is down just 1% from last year, revealing that despite optimism, interest rates remain a top concern for those looking to purchase a home.
This optimism has sprung into action with nearly all respondents (97%) having already taken steps in the homebuying process. About half (47%) have started saving for a down payment and nearly two in five respondents (38%) have established a budget for their home purchase.
The survey also revealed first-time homebuyers are willing to spend more on their first homes, with 40% citing they plan to spend $300,000 or more, up 9% from last year.
There’s still more to learn for first-time buyers
Despite 79% of low-to-moderate income (LMI) respondents expressing confidence or neutrality in their financial literacy regarding mortgages and homebuying, a surprising 46% remain unaware of down payment assistance programs that require lower initial investments.
In addition, over four in five LMI respondents cited the affordability of a down payment (82%) and affordability of a mortgage/other monthly expenses (81%) as one of the top three barriers they face as they begin the homebuying process.
“Down payments have remained an obstacle to the wealth vehicle of homeownership, but there are tools to alleviate some of the burdensome upfront costs,” said Kaminski. “Educating first-time homebuyers about the resources down payment assistance programs can provide, as well as the associated monthly costs of homeownership, can help them accomplish their dream of owning a home and strengthen their financial position over the long-term.”
Forever homes are top of mind, location preferences vary
This year’s data also saw an increase in respondents’ desire for forever homes, with 48% of respondents expressing their intention to purchase one, a 7% uptick from 2023. Conversely, interest in fixer-uppers or starter homes has decreased, with only 52% of respondents considering such properties, down 7% from last year. Among those seeking fixer-upper or starter homes, 40% hope to find a more affordable home.
When it comes to priorities in their home purchase, proximity to schools and workplaces emerged as top concerns for first-time buyers. Over one quarter (26%) cited access to quality schools and childcare as one of their top two considerations, while 22% emphasized being close to their workplace. Additionally, amenities such as backyards or pools (20%), access to dining and shopping (20%) and proximity to family (19%) were among the top priorities.
There’s also a notable desire for suburban living among first-time homebuyers. More than two in five (43%) first-time homebuyers prefer suburban areas over city living (28%), small towns (17%), and rural areas (12%).
Urban living is also growing in popularity, with the number of first-time homebuyers who prefer large cities or metro areas increasing by 6% over the last year. Notably, Gen-Z homebuyers are particularly driving the interest in urban living, with 31% expressing a desire for big city/metro area residences, compared to 29% of millennials and only 22% of Gen-X and Baby Boomers.
Other top considerations
Overpaying fears remain: In light of housing prices over the past several years and the competitive marketplace, nearly two-thirds (62%) of respondents have concerns about overspending on their first home.
Split on lender engagement: Mirroring the 2023 results, respondents are most likely to believe the best time to engage with a lender is as soon as they decide to buy a home, before looking (42%). One in three (33%) feel the best time is after they begin looking at houses, 25% believe lender services aren’t necessary until they find the home they want to buy.
Rising popularity of ARMs and down payment assistance: While 84% of first-time buyers plan to borrow for their home purchase, with 64% opting for mortgages, there’s a sharp rise in interest in adjustable-rate mortgages (ARMs), with 23% considering them—up from 12% in 2023. Additionally, over two in five buyers (42%) anticipate utilizing down payment assistance programs, up from 35% in 2023. These trends reflect a growing willingness among buyers to explore diverse financing options to achieve homeownership.
Survey methodology
This online Caravan® survey was conducted by Big Village among a sample of 1,009 U.S. adults ages 18 and older who plan to buy their first home this year (in 2024). The survey was live on January 10-18, 2024. In addition, 247 interviews were conducted among low to moderate income respondents, defined on a per-state basis as having household income within 50% to 80% of the median family income for that state. A similar survey was conducted from February 13 – March 1, 2023, among a sample of 1,007 first-time homebuyers.
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