NAR: More single woman, older repeat buyers in recent transactions
The age of repeat buyers hit a record high and single women have made up a larger share of overall buyers in home purchases in the past year, according to the National Association of Realtors. At the same time, the share of first-time buyers shrank and their down payments tended to be smaller.
The National Association of Realtors recently released its 2017 Profile of Home Buyers and Sellers. This report was based on responses to a 131-question survey received from 7,866 people who purchased a primary residence between July 2016 and June 2017.
Lawrence Yun, chief economist at the National Association of Realtors, said a shrinking inventory of homes available for purchase has fueled a number of trends that have reduced the share of first-time buyers. Thirty-four percent of home sales during the survey period went to people buying their first home, down from 35 percent in 2016 to reach its fourth lowest share since the survey began in 1981. Since this point, the average share of first-time buyers has been 39 percent.
"The dreams of many aspiring first-time buyers were fortunately dimmed over the past year by persistent inventory shortages, which undercut their ability to become homeowners," said Yun. "With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home. Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers."
First-time buyers had a median age of 32 years old. Their median income was $75,000, up from $72,000 in 2016. The typical buyer purchased a 1,640-square-foot home for $190,000, a smaller size and more expensive price than last year's median of 1,650 square feet and $182,500.
First-time buyers were slightly more likely to buy a home in a city, with 17 percent doing so. However, this share was down from 20 percent in the previous year.
With median home prices continuing to climb, first-time buyers made smaller down payments. The typical buyer purchasing their first home put down only 5 percent, down from 6 percent to match the lowest share since 2013.
Most first-time buyers relied on personal savings for a down payment, although one in four used a gift from a friend or family member to help finance the purchase. More than half said it took them more than a year to save up enough money for a down payment, with 25 percent saying this was the most difficult part of the buying process.
Forty-one percent of first-time buyers said they had student loan debt, up from 40 percent in 2016. The typical buyer with student debt had $29,000 in these loans, up from $26,000 in the previous year. More than half were paying back at least $25,000 in student loans, and 55 percent said this debt delayed their home purchases.
"Solid economic conditions and millennials in their prime buying years should be translating to a lot more sales to first-timers, but the unfortunate reality is that the nation's homeownership rate will remain suppressed until entry-level supply conditions increase enough to improve overall affordability," said Yun.
Other buying trends
Single women were making up a larger share of buyers, with 18 percent buying a home on their own. This share matched a high set in 2011 and was second only to married couples, who accounted for 65 percent of purchases. Single men made up only 7 percent of purchases, while unmarried couples accounted for 8 percent.
The limited supply of homes for sale led many buyers to pay the list price for a property, if not more. In 42 percent of transactions, sellers accepted an offer that met or exceeded their asking price. This was up 2 percentage points from the 2016 report, matching a record survey high set in 2007. More than half of all buyers in the West—51 percent—paid at or above the list price.
"Many of those in the market to buy a home this year had little room to negotiate," said Yun. "Listings in the affordable price range drew immediate interest, and the winning offer often times had to waive some contingencies or come in at or above asking price to close the deal."
Buyers favored homes in suburbs, small towns, or rural areas, with these purchases accounting for 85 percent of all transactions. Thirteen percent bought a home in an urban area, down from 14 percent in 2016.
Detached single-family homes continued to be the most popular type of property, purchased by 87 percent of buyers. This share was unchanged for the third consecutive year, remaining at its highest point since 2004. Eleven percent of purchases were multifamily homes such as condominiums and townhouses.
Buyers reported more ease with the mortgage process, which the National Association of Realtors attributed to a slight ease in lenders' credit standards and better financial health among buyers. Thirty-four percent of buyers said their application for a mortgage was somewhat or much more difficult than expected, down from 37 percent in 2016.
Fifty-eight percent of buyers used a conventional mortgage to finance their home purchase. Thirty-four percent used a low down payment mortgage backed by the Federal Housing Administration, up 1 percentage point from 2016 but down from 46 percent in 2012.
Eighty-seven percent of buyers used a real estate agent to purchase their home, down from 88 percent in 2016. Ninety-five percent said they used the internet in their home search, with real estate agents being the next most common resource at 89 percent.
Homeownership tenure was at an all-time high for sellers, matching a record set in both 2014 and 2016. The typical seller spent a decade in their home before listing their home, compared to the median homeownership tenure of six years prior to 2009.
The median seller gained $47,500 as a result of the sale, up from $43,100 in the previous year. This equity gain marked a 26 percent increase over the original purchase price, up from 24 percent in 2016.
Those with longer homeownership tenures saw the largest gain in equity, with the typical seller who spent 21 years or more in the home getting a 104 percent return on their investment. Sellers who purchased a home six or seven years ago had a median return of 27 percent, while those who bought a home eight to 15 years ago had a return of 14 to 18 percent.
More than half of repeat buyers—52 percent—used the proceeds from a sale to trade up to a larger home. This was up from 46 percent in 2016 and 40 percent in 2014.
Fifty-five percent of repeat buyers used the proceeds from a sale as a source for the down payment on their next home. This was a more popular method than personal savings, which was used by half of all repeat buyers. The median repeat buyer made a down payment of 14 percent on their next home, up from 11 percent in the previous year.
Repeat buyers typically purchased a 2,000-square-foot home, unchanged from the previous year. They spent a median of $266,500, up from $250,000 in 2016.
"The decline in first-time buyers and uptick in repeat buyers trading up to a larger home reflects the more favorable conditions for home shoppers at the upper end of the market, where listings are more plentiful and sales have been consistently higher over the past year," said Yun.
The typical seller was 55 years old with a household income of $103,300, up from $100,700 in 2016. The median age of a repeat buyer increased two years to 54, while the typical income shrank slightly from $98,000 to $97,500.
The share of sellers using a real estate agent held at a record high of 89 percent. Only 8 percent sold their home on their own, matching an all-time low for the third consecutive year.
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