Report on buyers and sellers identifies first-time struggles, pet influence
First-time homebuyers continued to make up a dwindling share of the real estate market despite strong interest in purchasing a home, according to a recent report by the National Association of Realtors. The report also identified a number of other trends, including a robust share of single women purchasing homes, the decreasing popularity of downsizing, and the effect of pets on home buying.
The National Association of Realtors recently released its latest Profile of Buyers and Sellers. This report is based on 7,191 responses to a 129-question survey issued to people who bought a home between July 2017 and June 2018.
"With the lower end of the housing market—smaller, moderately priced homes—seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford," said Lawrence Yun, chief economist at the National Association of Realtors. "Homes were selling in a median of three weeks and multiple offers were a common occurrence, further pushing up prices. These factors contributed to the low number of first-time buyers and the struggles of would-be buyers dreaming of joining the ranks of homeownership."
Married couples made up the majority of homebuyers, purchasing 63 percent of the homes sold during the purchase period. The typical buyer was 46 years old and earning a median household income of $91,600.
Single women were the next most common buyers, accounting for 18 percent of the year's purchases. Single men made up only 9 percent of all homebuyers, but tended to purchase more expensive homes at a median price of $215,000 compared to $189,000 among single women.
One-third of buyers were purchasing their first home, down from 34 percent in the 2017 survey and the third consecutive year with a shrinking share of first-time homebuyers. The National Association of Realtors says first-time homebuyers have not made up 40 percent or more of a year's sales since a first-time buyer credit ended in 2010.
"Low inventory, rising interest rates, and student loan debt are all factors contributing to the suppression of first-time buyers," said Yun. "However, existing home sales data shows inventory has been rising slowly on a year-over-year basis in recent months, which may encourage more would-be buyers who were previously convinced they could not find a home to enter the market."
The median age of a first-time buyer was 32 years old. The median age of repeat buyers hit an all-time high of 55, up from 54 in the previous year. First-time buyers had a median household income of $75,000, while the median repeat buyer had a household income of $97,500.
The typical buyer looked at 10 homes over a period of 10 weeks before purchasing one. Buyers who did not use the internet in their home search usually found a home more quickly, visiting four homes and finding one to purchase within four weeks.
Detached single-family homes were the most popular type of property, chosen by 82 percent of buyers. Eighty-six percent of buyers bought a previously owned property, while 14 percent bought a new residence.
The typical buyer purchased a 1,900-square-foot home with three bedrooms and two bathrooms. The median home purchased during the survey period was built in 1991, and located just 15 miles away from the buyer's previous residence.
The median purchase price for a home was $250,000. Buyers typically paid 99 percent of the seller's asking price.
First-time buyers tended to buy smaller residences, with a median size of 1,600 square feet and purchase price of $203,700. Repeat buyers spent a median of $280,000 on homes with a median size of 2,000 square feet.
Most buyers expected to stay in their newly purchased home for a long time, planning to be there for a median of 15 years. Nineteen percent of buyers said they don't plan to move again.
Eighty-four percent of respondents said they think heating and cooling costs are at least somewhat important when considering a home. Those who bought a new home were most likely to say they wanted to avoid renovations or problems with the electrical and plumbing systems, while those purchasing a previously owned home were most likely to do so due to price considerations.
Buyers contributed a median of 13 percent of a home's purchase price as a down payment. This was up from 10 percent in last year's survey and the highest share since 2005.
First-time buyers paid a median of 7 percent, up from 5 percent last year and the highest share since 1997. Repeat buyers put down a median of 16 percent of the purchase price, a year-over-year increase of 2 percentage points and the highest share since 2010.
Most buyers—58 percent—used their personal savings when buying a home. Thirty-nine percent of buyers, including 56 percent of repeat buyers, used the proceeds from the sale of their previous residence. Nearly one in four first-time buyers—24 percent—got a gift from a friend or relative to put toward the purchase.
Student loan debt continued to be a hurdle for many buyers. Among the 13 percent of buyers who said saving up for a down payment was difficult, half said their student loan debt had hampered their ability to save up money for a home purchase.
Twenty-four percent of all buyers said they have student loans, with a median debt of $28,000. First-time buyers were more likely to have student loans, with 40 percent saying they have this debt with a median amount of $30,000.
"Even with a thriving economy and an abundance of job opportunities in many markets, monthly student loan payments coupled with sky-high rents and rising home prices make it exceedingly difficult for potential buyers to put aside savings for a down payment," said Yun.
This year's survey looked at the influence of pets on purchasing decisions. Fifteen percent of buyers, including 20 percent of unmarried couples, said it was critical that they buy a home with pet-friendly amenities such as proximity to a veterinarian or outdoor spaces.
Seventy-three percent of buyers said the home they purchased was either larger than their previous residence or similar in size. Just 9 percent said they were looking to downsize.
"Homeowners that may be looking to downsize tend to be competing for the same homes as first-time buyers, and we are experiencing a scarcity of inventory in those smaller sized, moderately priced homes," said Yun. "These buyers, not finding the smaller home they are looking for, may decide to purchase an equivalently sized home or simply stay put in their current home."
The most common reason a person gave for buying a home was the desire to own a residence of their own. Twenty-nine percent cited this benefit.
Most buyers saw the home purchase as a good way to build their personal wealth. Eighty-four percent said they consider the purchase a good investment.
The typical seller was 55 years old and had lived in their residence for a median of nine years. Sellers typically found a buyer in three weeks and sold the property for $55,500 more than they had purchased it for.
Forty percent of sellers said they offered incentives to attract buyers. Sixty-four percent said they were satisfied with the selling process.
Fewer people were trying to sell their home alone, with "for sale by owner" transactions falling to a record low of 7 percent of all sales during the survey period. This share has been declining steadily since a high of 15 percent in 1981.
FSBO sellers often know a buyer personally. This likely contributes to these transactions going more quickly than sales conducted through a real estate agent, with 73 percent selling in less than two weeks. Seventy-two percent of FSBO sellers who knew the buyer said they were satisfied with the transaction.
However, FSBO sales also resulted in significantly lower selling prices. The median FSBO sale had a selling price of $200,000, compared to $264,900 for sales conducted with a real estate agent.
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