Who is your Most Profitable Home Buyer in 2011!

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by Bill Gelbaugh.

Who are they? What are they buying? How are they buying?

Finding a home buyer in this market can make grown men and women cry. ItĘĽs OK, we donĘĽt judge… But now itĘĽs time to put away the Kleenex. After doing some digging, we have the news you want to hear. Are you ready? There are customers out there, itĘĽs true, that can bring you optimal profit this year!

We heard your cries and we wanted to take them as a challenge to find out just who these buyers are; what they look like, their wish lists, and what homes you should offer to draw them to your table. Turns out these customers are very knowable indeed. Furthermore, the home they are looking to buy is very specific. In this post we will take a look at the characteristics of the buyer, characteristics of the home, and the process of buying a home to learn more about the current market’s potential “optimal profit” customer.

Click the “more” link below to see for yourself YOUR most profitable home buyer in 2011 (Kleenex not required).

Among the 8.4 million households that bought a home in the past two years, 17 percent bought a new home. Forty-one percent of the 8.4 million who purchased a home in the last two years were first-time buyers. The new home buyer has an average income of $101,811. A third of new home buyers make less than $60,000, another third make between $60,000 and $99,999, and the remaining third make $100,000 or more.

Two thirds of new home buyers are married—39 percent are married with children, and 28 percent are married without children. Sixteen percent are single person households, and 4 percent are single parent households. The average household size for new home buyers is 2.75 persons.

New Homes Purchased by Move-Up Home Buyers

On average, new home move-up buyers are purchasing higher priced and bigger homes than existing home buyers. The average market value of a new home purchased is $297,481, compared to $238,401 for existing homes, and $252,601 for all owner occupied homes.

New home buyers are also purchasing larger homes than existing home buyers. The average square footage of the new homes purchased is 2,309 square feet, compared to 1,700 for existing homes and 1,800 for all owner-occupied homes.

The large majority, 87 percent, of new homes purchased were single-family detached, while 11 percent were single-family attached, and 3 percent were multifamily condos.

New Home Buying Process: Move-up Home Buyers

On average, both new and existing home buyers looked at 15 homes before purchasing a home. Just over a third of new home buyers looked at 15 or more homes, 17 percent looked at between 10 and 14 homes, 28 percent between 2 and 9 homes, and 17 percent looked at only 1 home.

Thirty-nine percent of new home buyers used their savings as the down payment for their new home, 34 percent used the sale of their old home and 16 percent used no down payment when purchasing their new home.

The AHS asked the buyer to list all reasons for choosing a particular home. Layout/design, size and price were the top three reasons both new and existing home buyers choose a home.

The AHS also asked buyers to list all reasons for choosing a particular neighborhood. The two most popular reasons among new home buyers were the looks/design of the neighborhood and that neighborhood was convenient to work—32 and 31 percent, respectively. About a quarter of new home buyers chose the neighborhood because of the house itself.

Homes Purchased by the First-time Buyer

On average, first-time home buyers are purchasing lower priced and smaller homes than trade-up buyers. The average market value of a first-time buyer’s home is $184,091, compared to $297,481 for trade-up buyer homes.

The median square footage of first-time buyers’ homes is 1,500 square feet, compared to 2,000 for trade-up buyers and 1,800 for all owner-occupied units.

The large majority, 82 percent, of first-time home buyers purchased a single-family detached home. The remaining 18 percent are split evenly between single-family attached homes and multifamily condos.

New Home Buying Process: First-Time Buyers

On average, first-time home buyers looked at 15 homes before purchasing a home and similarly trade-up home buyer looked at 16 homes. Half of the first-time home buyers looked at 10 or more homes, while only 10 percent looked at one home before purchasing the home.

Sixty-three percent of first-time home buyers used their savings as the source of their down payment, and 22 percent had no down payment.

For first-time and trade-up home buyers the three most common reasons for choosing a particular home were price, layout/design, and size. More first-time buyers chose their home because of price than existing buyers—38 percent of first-time buyers, compared to 27 percent of trade-up buyers.

For first-time buyers, the most common reason for choosing a neighborhood, at 31 percent, was that the neighborhood was convenient to work, followed by 28 percent reporting that the house itself was an important consideration, 27 percent the looks/design of the neighborhood, and 23 percent the proximity to their friends/family.

Conclusion

While new home buyers only account for 17 percent of the home buying population they are a very important group. New home buyers are buying bigger more expensive homes than trade-up buyers, and although they are the same age as the average home buyer, they are making more money. Two thirds of them are married and they have about 2.75 people in their house. Almost three quarters of them pay for their house with their savings or the sale of their old home. The most important thing when choosing a home is the design/layout of the home.

First-time home buyers make up 41 percent of the home buying population. They tend to be a little younger and make a little less money than the average home buyer. The homes they buy tend to be smaller and less expensive than the average home buyer. Only 45 percent of them are married and their average household size is 2.58. Sixty-three percent of them pay for their home’s down payment with their savings. The two most important things first-time home buyers look for when choosing a home are price and layout/design.

This Blog Post was prepared and condensed from a HousingEconomics.com article.

For more information about this item, please contact Heather Taylor at 800-368-5242 x8503 or via e-mail at htaylor@nahb.org.

One comment

  • 1
    April 29, 2011 - 9:58 AM | Permalink

    Here is a link to a great new article on Five Ways to Woo Your Buyer from Builder Online http://bit.ly/jQ4suK

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