Today’s Home Buyers: Who You Are, What You Want, Why You Buy

While home values continue to decline in most areas across the country, we’ve seen sales volumes start to increase in some of the hardest-hit markets, like Southern California or Phoenix.  Much of the uptick in sales volume has been attributed to first-time home buyers and investors, spurred by lower prices and the $8,000 tax credit.

While there’s debate over when a “bottom” will be reached in various markets, most everyone agrees that for a full housing recovery, buyers have to come back en masse — particularly the ‘move up,’ or ‘move across’ buyers who typically make most of the purchases.

With this in mind, we set out to get a snapshot of today’s buyer, and chart this over time as the market changes.  We commissioned Harris Interactive® to conduct a study about buyer sentiments. For the purposes of this study, we defined a buyer as someone who plans to purchase a home at some point in the coming two years, and we asked them a series of questions about their intent to buy.

Some of buyer answers surprised us, some didn’t.  But it gives an interesting window into today’s potential home buyers, and what’s driving their decisions.  Here’s what we found:

A significant portion of potential buyers (41 percent) are first-time home buyers or buying to invest. Slightly more are the ‘move up’ or ‘move across’ buyers who have to sell one home to buy another.  This of course would vary by region, but interesting to see how this plays out nationwide.

“Bigger homes” and “Affordability” now go hand in hand for many buyers. When asked for the reasons they wanted to purchase a new home, “I want/need a bigger home” was the most frequently-cited reason, chosen by 55 percent of buyers.  This was followed by “home prices are now at a level I can afford” chosen by 44 percent (respondents could choose multiple responses).  Perhaps surprisingly, very few buyers are looking to downsize to a smaller home, as this was the least-cited reason for buying (5%), among a list of various reasons.

Meanwhile, 17 percent of buyers indicated they wish to purchase a distressed property, such as a foreclosure or short sale.

Nearly one-third of home buyers (30 percent) plan to own the next home they purchase for five or fewer years. Just over another third (36 percent) plan to stay in their homes 16 years or more.  Since we don’t have historical data to compare, not sure what conclusions we can draw here, but it will be interesting to chart how this changes over time if we start to see home values stabilize.

17 percent of buyers are planning for ZERO down payment on a mortgage (of those who know how much they plan to use for a down payment). Given the fact that home values are still declining in most markets (and most “bottom” forecasts reach into 2010), this surprises us. Now, there are lots of individual factors, like whether the buyer can qualify for a VA loan, how long the buyer plans to own the home, etc. But we were still surprised that nearly one in five is thinking along these lines. On the flip side, however, more of those who know how much they plan to use for a down payment (22 percent) plan on a down payment of 21 percent or more of the purchase price.

The full methodology of this survey is available from Zillow – just email us at press@zillow.com.

Are you a buyer or a buyer’s agent?  Does any of this ring true for you?  Let us know what you think.