Low Home Prices Causes Surge In First Time Home Buying

Low home prices and excess supply helped drive a rise in first-time U.S. home buyers and reduce excess inventory, according to a study released Saturday by The National Association of Realtors.

According to the survey the number of first-time buyers rose to 41 percent from 39 percent of all transactions in 2007. National Association of Realtors Chief Economist Lawrence Yun attributed the increase to low home prices, "plentiful" supply and affordable interest rates. Looking ahead, Yun expects further increases in first-time home buyers because of a temporary first-time buyer tax credit and improvements to the FHA loan program.

According to the study, the median age of first-time buyers was 30, down from 31 in 2007. The median income for a first-time buyer was $60,600 and typical first-time buyers bought homes costing $165,000. Of first-time buyers who made a down payment, 69 percent used savings and 26 percent used money from a friend or relative. Another 7 percent received a loan from a relative or friend, while 16 percent used funds from their investments. A fixed-rate mortgage was chosen by 92 percent of those surveyed. Looking at home sellers, the median age was 47 with income of $91,000. Three-quarters of respondents were married, lived in their home for six years and had their home on the market for eight weeks.

Results from the survey come from a questionnaire that NAR mailed to 133,000 home buyers and sellers nationwide who bought their homes between July 2007 and June 2008.