Youthful home buyers and mortgage borrowers strong in today's market
September, 2000 By Jim Woodard Surprisingly, young people with limited incomes continue to comprise the largest segment of entry-level homebuyers in the country. About 52 percent of these buyers are between the ages of 25 and 34, and an additional 11 percent are under the age of 25. Considering the continuing increase of home prices in most markets, this is an amazing statistic. It shows the intense motivation of today's young people to own their own home, despite substantial sacrifices they must make to accumulate a down payment and qualify for a needed mortgage loan. They're carrying on the long tradition of achieving the great American dream of owning a home, with perhaps even more determination than their parents had. First-time homebuyers account for about 42 percent of all home sales, according to a recent survey. They were a driving factor in setting a new record for the housing market last year, and are maintaining that pace this year. "Without this strong level of young entry-level buyers, people would be unable to sell their existing homes to meet growing family needs, or trade down to smaller, easier-to-maintain properties as lifestyle preferences change," said Dennis Cronk, president of the National Association of Realtors. "In short, the overall health of the housing industry depends on this critical segment of the market." Last year, the typical first-time homebuyer earned a median income of $49,700 and purchased a starter home costing $104,000, with a down payment of $5,000. Those are national median figures. The figures related to markets on both coasts and other high-cost areas are much higher. While 55 percent of new homebuyers are married couples, 22 percent are single women and 12 percent are single men. Unmarried couples account for 9 percent of first-time buyers. Although condos and townhouses combined make up only 15 percent of entry-level buyers nationally, they are an increasingly popular choice in high-cost housing markets. First-time buyers are 13 years younger than the typical repeat buyer, and are more comfortable with using technology to search for a home and mortgage financing, and communicating with real estate agents. While the median age of entry-level buyers has been stable between 31 and 32 during the past decade, they are becoming more ethnically diverse because immigrants and minorities are a growing segment of the market. Once established in this country, the new citizens achieve homeownership rates comparable with the overall population. Also, over half of the country's 28.3 million second-generation Americans are under the age of 30, a NAR report noted. A key factor in today's evolving home selling market is the ability of homeowners to educate themselves about the housing market, the buying and financing process, and investment considerations. They can now do this at their own pace and convenience on the Internet. In fact, 37 percent of homebuyers now shop for a home and financing on-line. That reflects an 18-fold increase in just the past four years. Many first-time buyers don't understand the basics of qualifying for a mortgage, the NAR study revealed. For people thinking about buying a home, the first thing to do is take a good look at their credit, to pay bills on time and start a savings plan. Mortgage payments can be fairly comparable to rent, or even less, but without good credit potential buyers can't get a loan, NAR advised. * * * Unfortunately, mortgage-related schemes are only too common, resulting in problems for consumers and the vast majority of honest mortgage professionals. In fact, its become such a problem that the Mortgage Bankers Association recently held a special seminar for mortgage industry practitioners and others about the ongoing threat of unethical and often illegal activities. "With mortgage lenders each year losing millions of dollars because of fraud, the MBA sponsored the seminar on how to detect and take action against mortgage loan schemes such as property flipping, fraudulent appraisals, and falsified documentation," said an MBA spokesperson. | 
