Summary of an National Association of Realtors report by John Burns, John Burns Real Estate Consulting
Let me summarize for you some of the key findings from an NAR report on home buyer and seller generational trends. So often, useful facts get lost in big reports.
- 13% multigenerational living. 13% of buyers have multiple generations over the age of 18, with 21% of those buyers headed by someone aged in their 50s. This ties in nicely with our last Consumer Insights survey of more than 20K home shoppers, where 50% of those in their 50s said they planned on living multigenerationally, either with a parent or a child. 37% of multigenerational buyers had an adult child, while 21% of buyers had an aging parent.
- 73% couples. Married people buy 65% of all homes sold, with unmarried couples buying 8%.
- 16% single women double the men. Single women are almost twice as likely to buy as single men, purchasing 16% of all homes sold compared to 9% of all homes for single men. After the age of 50, purchases by single females rise even more.
- 65% childless. Homes designed for adults rather than families make more sense, as 65% of all home buyers do not have children. Resale homes were primarily designed with families in mind.
- 11% foreign born. Consistent with our demographic findings that 23% of those born in the 1970s were born abroad and that foreign born buyers are less prone to purchase, foreign purchases are heavily skewed to those born in the 1970s. 17% of buyers aged 35–49 are foreign born—nearly double the percentage of any other age cohort.
Changing Buying Habits
- 43% finding their home online. 43% of buyers found the home they purchased online, ranging from 51% of those aged under 35 to 34% of those aged 60–68.
- 25%+ of Gen X and Gen Y buyers finding their home on their smartphone. More than half of Gen X and Gen Y used a mobile device in their search, and more than 25% found the home they purchased on their mobile device—meaning 75% did not.
- Bigger more important than smaller. Only 10% of buyers cited home size as the primary reason to move, with 7% wanting larger homes and 3% wanting a smaller home. We show more on this below.
- 70% suburban. Suburbs dominate, with suburbs including small towns capturing 70% of demand. This is consistent with our demographic findings, which also include a finding that urban has taken market share from suburban in the last 15 years.
Young Buyer Profile (under 35)
- Mostly first-time buyers. Young buyers comprised 32% of all buyers, and 68% of the buyers under age 35 purchased their first home.
- Less desire to renovate. Younger buyers who chose a new home did so to avoid to renovation headaches, while older buyers (60+) were slightly more likely to be drawn to new homes by the amenities.
- Convenience trumps affordability. Consistent with our demographic findings that today’s young buyers value their time more than prior generations at the same age, young buyers buy for job convenience (74%), affordability (58%), schools (44%) and parks (28%), in that order. Older buyers placed far less importance on these factors.
- The down payment is the hurdle.
- High LTV required. 63% of young buyers put 10% or less down, and 45% put 5% or less down. Without FHA financing and a recovering mortgage insurance industry, this buyer would be almost extinct.
- 31% get help. 31% of young buyers received a gift or loan from a friend or relative.
- Student debt a big hurdle. Student debt was cited by 54% of young buyers as the biggest impediment to saving the down payment. We estimate that student debt resulted in 8% (414,000) fewer home sales in 2014 than would have been the case if debt levels were the same as in 2005.
Big Differences between Move-Up and Move-Down Buyers
Younger move-up buyers sold at a tidy profit to buy a larger home, while older move-down buyers sold at a small loss to buy a smaller home. The key stats by age are as follows:
- Under 35: Owned prior home 5 years (2009) and sold it for $73K profit to buy a 590sf larger home
- 35–49: Owned prior home 9 years (2005) and sold it for $69K profit to buy a 450sf larger home
- 50–59: Owned prior home 11 years (2003) and sold it for $9K loss to buy a 40sf smaller home
- 60–68: Owned prior home 13 years (2001) and sold it for $13K loss to buy a 160sf smaller home
Those who bought in 2009 or later have clearly fared far better than their predecessors. Older buyers are able to sell at a loss because they have paid down part or all of their mortgage and have other financial resources.
In summary, the US home buyer has become quite diversified, including a rising number of foreign born and far more DINK (double income, no kids) and single female home buyers than ever before. Urban homes and homes closer to work have appreciated much faster, which our consulting team has verified in markets across the country. High-LTV programs have played a huge role in the housing recovery. All of these factors combine to create great opportunities for entrepreneurs who understand their local markets and can respond to these increases in demand that cannot be met by the resale market.