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Desire Outweighs Necessity in the Home Buying Equation

More new home buyers are buying homes out of personal desire rather than necessity in the second quarter of 2017, reports the Pennsylvania Association of Realtors (PAR) in a survey conducted by The Welcome Home. Thirty-one percent of recent buyers purchased homes because they wanted to—they might want to start building personal equity, move to a good school district, have a larger yard, purchase a vacation home, or stop renting—as opposed to the 26 percent of home buyers in the state whose primary reason for purchasing a home was due to a sudden or unexpected change to their life, such as a death in the family, pregnancy, financial hardship, marriage, divorce, or health reasons. Nearly 20 percent of home buyers cited relocation as their reasoning for purchasing a home, which falls somewhere between the want and need category.

Unsurprisingly, PAR found that “want to buy” purchasers were nearly twice as likely to secure a loan with the Federal Housing Administration (FHA) and purchase mortgage insurance, thereby avoiding the required 20 percent down payment. Out of those surveyed, 35 percent of “need to buy” customers purchased their homes with cash, as opposed to 23 percent of “want to buy” purchasers.  Both “need to buy” and “want to buy” purchasers had similar penchants for securing their home with a traditional 30-year mortgage: 37 percent to 40 percent, respectively.

Whether out of perceived necessity or choice, people in Pennsylvania are buying—home sales across the state are up 10 percent in the second quarter year-over-year, and new listings has dropped 8 percent from the previous quarter. Average sale prices are also up 1.7 percent to $175,000.

 

Methodology

The survey was fielded by Keystone Analytics on the evenings of May 4-6, 2017, using telephone interviews conducted by purchased consumer data as having purchased a home in the commonwealth in the last 12 months. Respondents were asked to confirm this before being invited to complete the survey over the phone.

Survey responses were weighted based on the geographic distribution of new home sales in Pennsylvania over the last 12 months, and grouped based on the layout of Pennsylvania’s demographic marketing areas. Results have a margin error of +/ - 5.7 percent within a confidence interval of 95 percent.

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