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Part II of our series on housing looks at who is buying a home, what they are buying, how they are paying for it, and homeownership tenure.
A recent report by the National Association of Realtors breaks down who is buying a home, what type of home they are buying, and why. The report starts by identifying the different generations of home buyers:
- 21 and Under – Generation Z
- 22-30 years old – Younger Gen Y/Millennials
- 31-40 years old – Older Gen Y/Millennials
- 41-55 years old – Gen X
- 56-65 years old – Younger Boomers
- 66-74 years old – Older Boomers
- 75-95 years old – Silent Generation
According to the report, Millennials (ages 21 -38 years old) made up the largest share of home buyers. Commuting costs was the most important concern for this group when buying. Gen Xers were in their peak earning years, purchasing the most expensive homes, and the largest homes. Buyers between 39-53 years of age were the most likely to purchase a multi-generational home.
Home Buyer Characteristics:
- 33% of all home buyers are first-time buyers
- 63% of recent buyers were married couples
- 18% of buyers are single females (54-63 years old)
- 9% of buyers are single males
- 8% of buyers are unmarried couples
- 37% of all buyers had children under 18 years of age living at home
- 12% purchased a multi-generational home to care for aging parents, for cost savings, and because children over 18 years of age are moving back home.
- 14% Buyers of new homes
new homes to
- Avoid renovations
- Plumbing issues
- Electricity issues
- 82% of homes are detached single-family
- Typical home was 1,900 square feet, 3 bedrooms and two baths, built in 1991.
- 33% of buyers find heating and cooling costs important
- Buyers expect to live in their homes for a median of 15 years.
- 88% of home buyers finance their purchase.
- 58% of home buyers came up with their down payment through a combination of savings and sales from a previous sale.
- 13% of buyers say saving for the down payment is the most difficult step in the home buying process, especially for those 28 years old and younger.
- 24% of home buyers reported having student loan debt.
According to iProperty Management. “Alongside the history low of homeownership rates is another occurrence – an unprecedented uptick in the average length of ownership for the average American.” The report states that from 2000-2007 (the seven years before the Great Recession) Americans stayed in their homes on average 4.21 years. In 2018, that number was 7.75 years. In 2019, that number went to 8.17 years.
In the past few years, as the interest rates have climbed toward 5% because of a strong economy, homeowners’ tenure has increased. Normally as people develop equity in their homes, they would take that equity and use it as a down payment on a new, and usually, bigger home. However, according to iProperty, “The prospect of financing a new home under current rates and restrictive conditions is a significant disincentive for existing homeowners. Rising interest rates also make the idea of selling and moving unpalatable for homeowners who may be locked into lower mortgage rates. Higher mortgage rates and origination fees can make moving to another home prohibitively expensive, even for homeowners with substantial equity. Additionally, selling a home can necessitate additional expenditures such as agent commissions, and upgrades/repairs required as a condition of the sale.”
The report goes on to say that while homeowners have seen an increase in their home equity, homeowners have opted to take advantage of home equity lines of credit to make improvements to their existing homes. As much as 61% of homeowners prefer to remodel or renovate instead of moving once they have lived in their homes for six years or more.
The Baby Boomer generation leads the way in staying in their existing home by finding new technology to help them “age in place.” Boomers are using new technology, advances in medicine, and in-home medical care to retrofit their homes to allow them to stay in their homes longer before transitioning to nursing or care facilities.
Additional factors are impacting the housing market, including construction costs, regulation requirements, corporation purchasing, and a changing economy. More of these topics will be addressed in additional parts of the housing series.