Where Will Buyers Get The Money To Buy A Home In 2017?
When it comes to buying a home, the greatest issue for the majority of buyers is from where to get the money.
Roughly 1 in 4 can pay cash, so that means the remaining 75% of homebuyers need another source of capital.
Many banks and mortgage companies exist solely for the purpose of making home loans, but not all "bank" loans are the same.
We can figure out where homebuyers in 2017 will get their money with a close examination of where buyers in the past were able to find theirs.
Where Buyers Get Their Money
Our first graph shows that in 2016, 97% of homebuyers obtained the money they needed to buy a home from either cash, conventional financing, FHA financing, or through a VA loan. When you throw in USDA loans and owner financing, 99% of all purchases have been accounted for according to the Tallahassee MLS.
This means that all other sources of funds make up less than 1% of the closings that occurred in 2016.
Average Home Price By Loan Type
It's also important to see which loans are being utilized by people at different price points.
The following graph shows the average home price that was purchased by each of the major loan types. It's probably worth noting that this is not the average loan amount, rather it's the average price of the homes being purchased.
A quick read of the top two graphs show that one half of all mortgage loans (on average) are conventional financing to purchase $250K homes.
Historical Sources Of Money For Homebuyers
The previous two graphs utilized information from home sales thus far in 2016, but the following graph allows us to see where buyers have historically obtained their money to buy a home. Do you see anything that immediately catches your eye?
While this may be an overly simplistic conclusion, I suspect we could link the creation of new conventional loan programs to the bubble that occurred in the Tallahassee real estate market back 13+ years ago.
The blue bars in the graph above show the percentage of real estate purchases made with conventional loans. What is now 50% of the market was well over 80% for a period of four straight years.
It suggests that the growth in the market was due to financing, not equally shared between cash and financed buyers. The red line shows the cash buyers, though not fewer than normal, certainly a much lower percentage of all buyers in the market.
Are you concerned that we are heading back towards a bubble market?
Buying A Home In 2017
If you are thinking about buying a home in 2017, I encourage you to do things differently than the way other buyers will go about it. As I've shared in previous posts, the majority of buyers end up regretting their choices within the first year of owning their home (READ HERE FOR FULL ARTICLE).
The people who buy a home using our process end up very happy. You could even say THEY ARE THRILLED.
Something tells us you’re just … well … smarter than most people looking to buy a home.
Introducing Home Buying For Smart People
Here’s what we’ve got for you:
- A systematic, simple process to use modern technology to help you find the right home, at the right price.
- A clear tutorial approach to the “Manausa method” of making sure that you see ALL of the homes that fit your needs without exposing yourself to the serious mistakes that many homebuyers make.
- A sure-fire way to win the negotiation ... don't let a weak agent allow you to miss out on the home of your dreams!
Home Buying For Smart People is a free multi-part course and ongoing email newsletter. Join the thousands of other "smart people" who saved thousands of dollars when buying a home in a careful and prepared manner.
It is a competitive real estate market and you are not the only buyer that will be making an offer on a home. Why not be the buyer in the market that knows exactly what other buyers are willing to pay so that you can choose to either win the home with the correct offer or move on to a home that better suits your needs.
We help our homebuyers understand market conditions and the mortgage market so that they are in position to negotiate effectively. Unlike when working with untrained real estate agents, with us you'll have the confidence to make the right decisions and not be pressured into spending more (or missing out) on the home that you want to buy.