“Stats from Trading Economics.com (and the University of Michigan) show positive fundamentals will drive growth in the housing, market, and in tumVill bolster the economy, since new household consumer spending and housing investment is a key driver of the economy.” – Gord Collins ‘
Who Are Today’s; “Home Buyers and Sellers?
Here’s an idea for a new TV series: The show is called “The Buyers.” Based on a real-life story, America’s home buyers divide themselves into teams based on their respective age group, with edgy team names like the Younger Boomers, Older Boomers, Millennial, Gen X and the Silent Generation.
These “teams” compete for a limited number of homes in a scorching hot marketplace where prices continue to climb, at least on the national level.
The suspense lies in finding out the answers to the following questions: Which age group will buy the most homes? Which will the pay the highest home prices, and which the lowest? Which will end up with the greatest customer satisfaction? The answers are sometimes surprising, even if many plot points are predictable.
A Snapshot of Society
Not only is this “show” based on reality and real numbers, but it also presents a snapshot of American life, the changing patterns of home ownership and who the most active buyers are in an ever-changing market.
Spoiler alert: The group that buys the most homes, according to the 2018 Home Buyer and Seller Generational Trends, published by the National Association of Realtors (NAR) are the Millennials, an up-and-coming cohort in their late 20s and middle 30s who are expanding their presence in the market with each succeeding year.
Their main rivals are Gen X, age 39 to 52, the second most active group of buyers. Gen X also has the highest median incomes and buys the largest homes, measured in median square-footage. (All the numbers in the Generation Trends report are medians. The median is the middle number in a list of numbers arranged from lowest to highest.)
Younger Boomers, ages 53 to 61, are now approaching their retirement years. They are also “the caretaker” generation, and tend to be the biggest buyers of multi-generational homes, so they can accommodate aging parents or young people who are moving back home. Older Boomers are the next oldest segment, aged 62 to 71.
And don’t count out older people in the Silent Generation, age 72 and beyond: They are still a vital segment of the housing market – plus they own more vacation homes than any other age group.
First-Time Home Buyers
People buying their first homes are a big part of the story, accounting for more than one out of three buyers in 2017. Nearly two-thirds of Millennial-age buyers got their first set of keys last year.
Millennials were also the age group that was most likely to have rented an apartment or house prior to buying (56%) or to have lived with family or friends (18%). Across America, it’s easy to imagine new home owners exulting: “Finally, we have our own place,” while their former hosts are saying, “Finally, we have our own place back.”
The Most Popular Home in America
The typical home purchase is not a surprise: That home is the three-bed- room, two-bath place just under 2,000 square feet in size. This fact may be misleading: Is this really what four out of five Americans preferred to buy last year? Or did they settle because this was the best available home in their price range?
Given a choice, it’s conceivable some people may have preferred homes that were larger; after all, Gen X homebuyers, who had the highest income of all age groups, also bought the largest houses.
Another area where the Generation Trends survey can be misinterpreted, without a footnote or two, is the reported preference for existing homes over new construction. According to the report, five out of six buyers settled for an existing home, rather than a new house in a spanking new suburb.
The predominance of existing homes may not be a matter of consumer preferences, pure and simple. After all, a new home on the urban fringe has been a popular choice for several generations. Have tastes changed that dramatically?
Probably not. Instead, the explanation for the overwhelming choice of existing homes has more to do with supply. Home-building numbers are just beginning to recover and remain far from their soaring pre-recession heights. Builders are keeping their inventories low, to prevent financial losses in the unlikely event of a housing crash.
In short, people bought existing homes because that’s mostly what the market offered them.
Priorities and Preferences
In fact, other statistics in the same report seem to hint that many people would prefer new homes to control maintenance costs. More than a third of Millennial wanted to avoid costly renovation work such as plumbing or electricity issues.
At the same time, Millennial were also the most likely to consider buying a home in foreclosure. Buying an existing home abandoned by a previous owner does not sound like a way to avoid maintenance costs, because foreclosures are often in poor condition and need lots of work. Price seems to be the motivation behind Millennial interest in foreclosures: Some young people were willing to pay below-market prices for homes and do the repair work themselves.
Comfort, Convenience and Commutes
After cost, factors like comfort, convenience, short commutes and security seem to have been among the top deciding factors in home buying. More than a third of all buyers said heating and cooling were the most important “environmental features.”
For buyers age 62 and older, adequate windows, doors and siding were especially important. One interpretation of those preferences are concerns with both cost (such as the expense of replacing windows and siding) and basic security (including the condition of windows and doors.)
Millennial said short commutes to work were important; that preference makes sense for people who are newly married and starting families, who want to maximize their time at home.
The main reason, however, at least for buyers age 62 and younger, was simply to have a home of one’s own. For Older Boomers and members of the Silent Generation, being closer to family and friends was most important, an indication that seniors prize relationships above many other factors.
In terms of timing their home purchases, buyers across all generations indicated that it was “just the right time.” The next most common response was that buyers did not have much choice, and needed to buy a home for tax purposes, a divorce, a business-related relocation or some other compelling reason.
Not surprisingly, different generations plan to own their homes for different lengths of time. Younger boomers, mostly in their 50s, said they intended to own their homes for 20 years. That long-hold strategy suggests that 50-somethings prefer to stay in their homes until the need for senior housing comes along.
Millennial, on the other hand, said they planned to sell their homes in 10 years, which suggests they are thinking of moving up to larger homes in the foreseeable future.
TAX CHANGES AFFECTING PRICES LESS THAN FEARED
Many analysts, including the National Association of Realtors, believed that the tax cuts passed late last year would bite into housing demand, thus reducing prices…That may be happening in some markets. In the fourth quarter of last year, sales activity in Manhattan was at the lowest pace in six years…. Still, in most areas of the country, where the median sales price isn’t over $1 million, the tax changes may not weigh as heavily. In many metros, a better question might be how much longer can … buyers….keep the momentum going as they search in a market where supply is so tight. – Marketwatch
And How Long Did the House Hunting Last?
Buyers from different age groups spent very different amounts of time on the hunt for a new home. Younger Boomers took the longest time, 10 weeks, to make up their minds. One possible reason for this is that the majority of buyers in this middle-aged group have already owned homes, so the longer search time may reflect that experience has taught Younger Boomers to be more diligent in their home-buying choices.
On the other hand, the oldest buyers, the Silent Generation, spent two weeks less time home shopping than Young Boomers, despite having equal experience as home owners, at the very least. Were older people less picky? One educated guess is that older buyers had fewer homes to choose from, because their choices were constrained by many age-related requirements (like needing a single story home).
Unsurprisingly, the Silent Generation were the biggest buyers of retirement housing among all age groups.
DEMAND REMAINS HIGHER THAN SUPPLY
“Feedback from Realtors, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher… The unfortunate reality for many home shoppers is that reaching the market will remain challenging if supply stays at these dire levels.” – Lawrence Yun, chief economist, National Association of Realtors
Down Payments from Savings & Sale Proceeds
Nearly nine out of 10 of all buyers bought their homes with mortgage financing, although that percentage slides downwards as buyers age: Older Boomers, for instance, used financing to buy homes only seven out of 10 times, while just over half of buyers in the Silent Generation took out mortgages for new-home purchases.
Members of the Silent Generation were able to parlay more than half of their sales proceeds (57%) toward their next home purchases, the highest among all age groups. That’s not surprising, insofar the Silent Generation reported the greatest profits on the sale of their homes among all groups of $60,000.
Indeed, home ownership was profitable for sellers of all age groups last year, with sellers reporting sale prices $47,500 more than they originally paid.
Homes also sold quickly, requiring a median three weeks from listing to handing over the keys. Millennial sold their homes in only two weeks, while seniors in the Silent Generation required six weeks to sell their homes.
Among all age groups, reasons for selling ranged from the home being too small (16%), a desire to be closer to friends and family (14%), and job relocation (11%). Millennial in particular tended to cite the small size of their existing home as the reason to sell and move up.
Gen X sellers reported the highest income with $123,600, while Silent Generation sellers had the lowest median income of $73,300.
Nearly three out of four sellers were married couples. Among Millennial-aged home sellers, nearly nine out of 10 had exchanged vows, the highest out of all groups. Across the board, sellers owned their homes a median 10 years before listing their properties for sale.
HOME SALES PREDICTED MODERATELY HIGHER
“While existing home sales may struggle to top their best-in-over- a-decade 2017 performance, new home sales should provide enough growth to push total home sales in the U.S. modestly higher in 2018…. Housing construction continues to lag demand by a wide margin, so we expect to see housing starts grind higher in 2018.” – Len Kiefer, Freddie Mac deputy chief economist
9 out of 10 Buyers Recommend Realtors
The preference for using a Realtor or professional sales agent was common to buyers in all age groups: Nearly nine out of 10 (87%) employed Realtors to help them buy or sell their homes. Realtors and other home-sales professionals were particularly popular with Millennial (90%), while Realtors were highly popular with buyers and sellers from age 63 onward (84%).
Honesty and trustworthiness were the foremost traits preferred by most buyers in Realtors. And an eye-opening 89% of last year’s buyers said they would use the same real estate professionals again and recommend them to other buyers.
Still… The American Dream
Okay…as a TV show, the drama of America’s home buyers may not be as spine-tingling as “Westworld” or “The Walking Dead.” Even so, buying and selling remain fascinating subjects for many people, because home ownership, or owning a bigger and better home, remains a goal for millions of Americans.
Most of us agree that homes are a good investment and that well-maintained properties often gain value in markets where demand is historically strong. Sometimes the peace of mind that comes with home ownership is better than the excitement of watching TV shows about rampaging zombies. It certainly helps many people sleep better at night.