Real Estate: First Time Homebuyers’ Perspective

by JT McGee

globe, global, small globe, mortgagesI think it’s always a good idea to have a basis for comparison in everything we do.

I’ve been reading through Genworth’s International Mortgage Trends Report and I’ve found a few interesting stats about international perception of the mortgage market.

Some stats were expected – the average first time home buyer is older today than in the past, for instance. Others were a little less predictable. Anyway, I found three charts that I really liked and wanted to pass along.

Borrower Confidence

This chart rang out in a way the other charts couldn’t. This was really my basis for comparison for a lot of the remaining charts because it shows how the United States really isn’t all that different when it comes to borrowing for a home.

First time homebuyer stats

We’re middle of the road when it comes to the LTV amount we find most comfortable. It looks like 90% of homeowners in Canada, Ireland and the US are all fairly content with a 10% down payment. Note that the United States is the only one of any of these countries to have a 30-year fixed mortgage.

Leveraged First-Time Homebuyers

This chart reflects on the amount of leverage potential first-time homebuyers have before buying a home. Go figure – the US has the most indebted first-time homebuyers.

first time homebuyer, first time homebuyer leverage, LTV, debt servicing

This plays into something I’ve thought for a long time – record low interest rates make everyone trigger happy. When rates are at zero who doesn’t want to be a borrower? (For the record, we have the lowest costs of borrowing of any nation in this list.)

I can’t say I’m surprised to see that American first-time homebuyers are the most levered before buying a home. The prevalence of a 30-year fixed mortgage allows for borrowers to afford more house with a lower monthly payment. Face it: most people payment shop, anyway.

It should be made clear that American first-time homebuyers are a full .7 years younger than the eight country average (29.4 vs. 30.1 years old.) 😉

Market Sentiment

So I saved the best chart for last. This chart shows the difference in opinion about the real estate market in each area by prospective and current homeowners.

Where prices are falling, prospective homeowners are more likely to think it’s a good time to buy compared to prospective homeowners. Likewise, in areas where home prices are rising, current homeowners think it’s a good time to buy whereas prospective homeowners are less confident in the market.

real estate market opinion, global real estate, real estate market sentiment

This is by far my favorite stat because it shows how willing we are to pay for our opinions. As long as Canadian real estate keeps on the up and up, homeowners are going to party like its 1999. As long as US real estate declines, prospective buyers are going to be rooting for bargains.

Sidebar: It’ll be fun when the world realizes Canada isn’t the high-growth commodity country it’s perceived to be. Don’t tell anyone my secret. The financial markets are oblivious to the reality that is the Canadian economy.

Confidence

Confidence is obviously a focal point for this specific report. While the US is the most confident borrower, it isn’t exactly running #1 in the list of countries where buyers feel most confident they can repay their debts. I think that’s the classic case of saying one thing and doing another.

There are also some very serious divides in general perceptions about consumer finance. India, for example, is far more likely to believe mortgage insurance should be used to allow people to buy a higher quality home. In the United States, borrowers are more likely to believe it should be used to support a smaller down payment or buying more home than one can afford.

I’ve never really associated cost with build quality when it comes to homes. India has a pretty unique housing boom. In bigger cities where premium housing is the norm, you can only pick 2 of 3 features – inexpensive, properly-sized, high-quality.

Anyway, if you’re feeling like you need some good bathroom reading in your life, start with the mortgage trends report linked at the top of this article. There’s enough interesting information there to make hundreds of posts.

Photo by: fsse8info

{ 1 comment… read it below or add one }

Paula @ Afford Anything December 27, 2011 at 00:12

It amazed me when housing prices first fell – in 2008 – and everyone acted like it was the end of the world. “This is awful!” …. awful for whom? For owners, sure. For buyers, its a godsend. But back then, even buyers were repeating the “its awful” chorus — probably due to uncertainty about how much further it would fall.

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