The just-released National Association of Realtors®’ Annual Profile of Home Buyers and Sellers also found that for-sale-by-owner transactions hit an all-time low of 8% for the second straight year.
PALM COAST – November 1, 2016 – The quickening pace of home sales over the past year included a small rebound from two key segments of buyers missing in action in recent years: first-time buyers and single women.
The just-released National Association of Realtors®' annual Profile of Home Buyers and Sellers also found that for-sale-by-owner transactions (FSBOs) hit an all-time low of 8 percent for the second straight year – almost 90 percent of all respondents worked with a real estate agent to buy or sell a home. The survey's results represent owner-occupants and do not include investors or vacation homes.
After slipping for three straight years, the share of sales to first-time home buyers ticked up to 35 percent, the highest since 2013 (38 percent) and a revival from the near 30-year low of 32 percent in 2015. In the 35-year history of NAR's survey, the long-term average is 40 percent.
"Young adults are settling down and deciding to buy a home after what was likely a turbulent beginning to their adult life and career following the Great Recession," says Lawrence Yun, NAR chief economist. "Demand increased over the past year because of a robust job market for those with a college degree and renter fatigue at a time when homeowners continue to see their equity rise."
Two out of three (67 percent) of first-time buyers said their top reason for buying was "a desire to own a home of their own," up from 64 percent in 2015 and 53 percent in 2014.
"Even with the affordability challenges many buyers face, the allure of homeownership is not lost among the younger generation," adds Yun. "Those under age 35 made up 61 percent of first-time buyer transactions."
However, Yun says the uptick in new homeowners, while encouraging, is still subpar as a piece of the total market for 18- to 35-year-olds due to 1) a lack of affordable new and existing inventory, 2) home prices in many markets that have risen far above wages, and 3) the difficulty saving for a downpayment due to rising rents and student debt.
"First-timers' ability to enter the market more convincingly over the next year greatly depends on supply improvements at the lower end of the market, and if wages can finally awaken from their sluggish pace of growth," says Yun.
Single female buyers
Married couples once again made up the largest share of buyers (66 percent) and the highest income ($99,200). However, the survey revealed that single women made up more of the buyer pie than in recent years (based on household composition). After falling to 15 percent of buyers a year ago, which tied the lowest share since 2002, single females represented 17 percent of total purchases – the highest level since 2011 at 18 percent.
"Despite having a much lower income ($55,300) than single male buyers ($69,600), female buyers made up over double the amount of men (7 percent)," says Yun. "Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family. With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women."
The median age of first-time buyers in this year's survey was 32, matching the all-time high last set back in 2006, and up from 31 the past five years. The typical first-time buyer had a higher household income ($72,000) than last year ($69,400) and purchased a slightly larger home (1,650-square-feet; 1,620-square-feet in 2015) that was more expensive ($182,500; $170,000 in 2015).
The typical repeat buyer was 52 years old (53 in 2015), earned $98,000 ($98,700 in 2015) and purchased a 2,000-square-foot home (2,020 square-feet in 2015) costing $250,000 ($246,400 in 2015).
Financing the purchase
The size of downpayments has stayed roughly the same in recent years. In this year's survey, it was 6 percent for first-time buyers (third straight year) and 14 percent for repeat buyers (third time in four years). Fifty-nine percent of buyers financed their purchase with a conventional mortgage, and 33 percent of first-time buyers took out a low downpayment Federal Housing Administration-backed (FHA) mortgage, which is down from 54 percent in 2011.
"Fewer first-time buyers (40 percent) compared to a year ago (45 percent) indicated that the mortgage application and approval process was somewhat or much more difficult than they expected," says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. "Those with healthy credit scores and manageable or little debt should talk to a lender to see if they qualify. They'll likely discover that obtaining a mortgage isn't quite the confusing and tiring inquisition it was in the years immediately after the downturn."
Personal savings ranked first for both first-time buyers and repeat buyers as the primary source of their downpayment. The second most popular source for first-timers was a gift from a friend or relative (24 percent; 27 percent in 2015), and for repeat buyers it was the sales proceeds from their previous residence.
Respondents reported that debt (all types) delayed saving for a downpayment for a median of three years. For first-time buyers, 40 percent indicated they're carrying student debt, with a typical amount of $26,000 ($25,000 in 2015). Furthermore, of the 26 percent of first-time buyers who said saving for a downpayment was the most difficult task in the buying process, 55 percent said student debt delayed saving.
"As NAR survey findings discovered earlier this year, even those financially able to make on-time payments on their student loans are struggling to save for a downpayment, and many expect to be delayed from buying a home by over five years," says Yun. "Repaying student debt could slow the path to homeownership even more for those living in markets with steep rents and home prices."
The home search
Once again, the two most popular resources for home buyers are the Internet (95 percent) and real estate agents (92 percent). Despite a record-high 51 percent of buyers saying they found the home they purchased online, most buyers who used the Internet still ended up purchasing their home through an agent (90 percent).
Homebuyers increasingly use mobile devices and tablets, and 72 percent used at least one in the latest survey, up from 61 percent a year ago and 45 percent in 2013 – and most (58 percent) said this year that they found the home they eventually purchased on a mobile app.
"Regardless of the plethora of online resources readily available at the click of a mouse or the swipe of a thumb, consumers serious about buying a home continue to seek the expertise and market insights that only a Realtor can provide," says Salomone.
The most common housing type continues to be a detached single-family home (83 percent for second straight year) and one in the suburbs (54 percent vs. 52 percent in 2015). Meanwhile, purchases of townhouses or row houses remained at 7 percent for the third straight year; only four percent of buyers purchased a condo.
Overall, the typical home bought was built in 1991, and it had three bedrooms and two bathrooms. The share of buyers who purchased a new home was at an all-time survey low of 14 percent.
Selling a home: Seller use of an agent remains at all-time high and wanting a bigger house was the primary reason for selling
For the second straight year, 89 percent of sellers sold their home with an agent. This in turn – also for the second year in a row – kept for-sale-by-owner sales at its lowest level (8 percent) since the survey's 1981 inception. FSBO sellers have been below 10 percent since 2012.
"Although the imbalance of supply in relation to demand in recent year's continues to put many sellers in the driver's seat, they're still looking for a Realtor now more than ever to price their home competitively, market their home to the widest number of eyes possible and ultimately help close the deal within a given timeframe," explains Salomone.
The typical seller over the past year was 54 years old (unchanged since 2014), had a household income of $100,700 ($104,100 in 2015), and was in the home for 10 years before selling – a year longer than 2015 and matching the all-time high in 2014. Fewer sellers indicated they wanted to sell earlier but were stalled because their home had been worth less than their mortgage (12 percent versus 14 percent a year ago); the figure was 17 percent in 2014.
Sellers realized a median equity gain of $43,100 ($40,000 in 2015) – a 24 percent increase (23 percent last year) over the original purchase price. Homes sold after 21 years of ownership had the largest equity gain (124 percent or $127,600); underlining the volatility during the downturn, equity gains fell to 3 percent for owners who bought between eight and 10 years ago.
In the 2012 survey, it typically took respondents 11 weeks to sell their home; in the 2016 survey, homes were typically on the market for only a month.
A tad more sellers traded up (44 percent) compared to last year (42 percent) and slightly more (32 percent) traded down (31 percent in 2015). Sellers moved a median distance of 20 miles, though 72 percent stayed in the same state. The most popular reason given for selling their home? It's too small (18 percent).
Finding a Realtor
Feedback from sellers underscored once again that referrals and repeat business remain a large source of new opportunities for real estate agents. Nearly two-thirds of responding sellers either found their real estate agent through a referral by a friend, neighbor or relative; or they used their agent from a previous transaction.
Additionally, 85 percent of sellers indicated that they would definitely or probably use their agent again or recommend him or her to others.
© 2016 Florida Realtors®. All rights reserved. Reprinted with permission.