Tag Archives: demographics

First-Time, Single Women Homebuyers Resurface in Real Estate

Source: RISMedia

First-time and single women homebuyers have resurfaced in the real estate market, contributing to a significant share of transactions in a year marked by full-steam-ahead sales, according to the National Association of REALTORS® (NAR) 2016 Profile of Home Buyers and Sellers survey. First-time homebuyer sales rose to a share of 35 percent, the survey found; single women homebuyer sales rose to 17 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. These factors were why more first-time buyers (67 percent) said a desire to own a home of their own was the primary reason for their purchase (64 percent in 2015; 53 percent in 2014).

“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),” Yun adds. “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.”

Though the growth among new homeowners is encouraging, their overall share of the market is still subpar, according to Yun. The lack of affordable new and existing inventory, the outpacing of home prices to wages, and the difficulty in saving for a down payment is why the homeownership rate for 18- to 35-year-olds is currently hovering near its historical low.

“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.

Notably, 90 percent of respondents to NAR’s survey worked with a real estate agent to buy or sell a home, compared to 8 percent of for-sale-by-owner listings (FSBOs)—an all-time low.

Single Women Buyers on the Mend, Age of First-Time Buyers on the Rise
As in years past, married couples once again made up the largest share of buyers (66 percent) and had the highest income ($99,200), according to the survey; however, single women made up more of the buyer pie than in recent years. After falling to 15 percent of buyers a year ago, single women represented 17 percent of total purchases (highest since 2011 at 18 percent).

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).

Buyers Carrying More Student Debt; Difficulty Obtaining Mortgage on the Decline
Down payment sizes have roughly stayed the same in recent years—in this year’s survey, it was 6 percent for first-time buyers and 14 percent for repeat buyers. Fifty-nine percent of buyers financed their purchase with a conventional mortgage, and 33 percent of first-time buyers took out a low down payment Federal Housing Administration (FHA)-backed mortgage.

“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, Fla. “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 down payment. 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 down payment 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 down payment 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 down payment, 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.”

Buyers Rely on Internet and Agents; Single-Family Homes Top Choice
This year’s survey proved once again that the two most popular resources for homebuyers remain 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).

Mobile devices and tablets are increasingly becoming a resource for buyers. Their usage lifted to 72 percent in this year’s survey, which is up from 61 percent a year ago. Furthermore, 58 percent of buyers indicated they found the home they 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. “Given the numerous competitive markets with minimal supply, it’s no surprise that both first-time and repeat buyers sought an agent for assistance finding the right home and negotiating the terms of the sale.”

The most common housing type continues to be a detached single-family home (83 percent for second straight year) and one in a suburban area (54 percent; 52 percent in 2015). Meanwhile, purchases of townhouses or row houses remained at 7 percent for the third straight year; only 4 percent of buyers purchased a condo.

Overall, the typical home bought was built in 1991 and had three bedrooms and two bathrooms. The share of buyers who purchased new home was at an all-time survey low of 14 percent.

Seller Use of Agent Remains High; Desire for Bigger House Primary Reason for Listing
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 to their lowest share (8 percent) since the survey’s 1981 inception and below 10 percent since 2012.

“Although the imbalance of supply in relation to demand in recent years 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,” says 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.

With tight inventory conditions gripping most markets once again over the past year, sellers were considerably more successful finding a buyer in a shorter amount of time, with homes 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, at 32 percent, traded down (31 percent in 2015). Sellers moved a median distance of 20 miles—72 percent stayed in the same state—and the most popular reason given for selling their home was it being too small (18 percent).

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 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.

For more information, please visit www.realtor.org.

Affordable Housing Assistance Lacking for Low-Income Families

Source: RISMedia

Low-income families already vulnerable due to strained finances have had to contend with lengthy waiting periods and closed waiting lists for affordable housing, a recent report by the National Low Income Housing Coalition (NLIHC) reveals.

Importantly, affordable housing applicants are being shut out of the Housing Choice Vouchers (HCV) program, according to the report, entitled Housing Spotlight: A Long Wait for a Home. Fifty-three percent of HCV waiting lists were found to be closed to new applicants, and 4 percent were found to be available only to certain types of applicants.

“Most of the poor families that are unable to obtain affordable homes spend more than half of their limited incomes on housing,” said Diane Yentel, president and CEO of NLIHC, in a statement on the report. “They face impossible choices between paying the rent or paying for food, medicine, transportation, or child care.”

According to the report, 65 percent of the HCV waiting lists closed to new applicants were closed for at least a year, with those on the waiting list having to wait a median of at least 1.5 years for assistance. One-quarter had to wait at least three years.

The amount of households on HCV waiting lists, on average, is 2,013, the report found.

“Congress can make more housing affordable to the lowest income people by significantly increasing investments in deeply targeted and highly effective tools like Housing Choice Vouchers, Public Housing and the national Housing Trust Fund,” Yentel said.

Bills on the docket, according to the NLIHC, include the Pathways out of Poverty Act (H.R. 2721), the Ending Homelessness Act of 2016 (H.R. 4888) and the Affordable Housing Credit Improvement Act (S. 3237).

“Home is the foundation for success in every aspect of our lives,” said Yentel. “Investing in homes is an investment in education, healthcare and economic mobility. As a nation, we understand the housing affordability crisis we face, we have the solutions, and we know how these solutions benefit families, communities and the economy. We lack only the political will to rebalance housing policy and target resources towards those with the greatest need. When we achieve that, we will end the long wait for a home for the nation’s lowest income families.”

To view Housing Spotlight: A Long Wait for a Home in full, click here.

Source: National Low Income Housing Coalition (NLIHC)

Research: Homeownership Still Desirable for Millennials

Source: RISMedia

The majority of Americans still value homeownership, but millennials face major challenges in realizing this dream, nearly a decade after the subprime crisis.

Homeownership in America has taken a beating in the past few years. Eight years after the subprime crisis, homeownership remains at its lowest level in 20 years, at just over 63 percent. Does this mean the end of the American Dream of owning a home?

At first glance, the answer is no. New research from ReportLinker shows that for 80 percent of Americans homeownership remains the best investment a person can make.

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According to the same survey, owning a home is still the number-one, long-term financial priority for nearly 43 percent of Americans, ahead of ensuring a comfortable retirement, paying for their children’s education and leaving an inheritance.

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2015 report by Gallup corroborates these figures, showing that real estate leads four others choices as the best long term investment.

Slow to leave home

The problem may stem from the reluctance of young Americans to form a household, one of the main drivers of homeownership. During these economic hard times, the share of U.S. households with more than three generations under the same roof rose significantly, and has remained high. According to the U.S. Census Bureau’s Housing Vacancy Survey, growth in the number of household averaged just 625,000 annually in 2007-2013, compared to 1.5 million in 2015. But does the fact that this decline persists at a time when mortgage rates are at their lowest in 40 years indicate a change in the way Americans view home ownership?

But the picture becomes more nuanced when one looks at the importance that Americans assign to homeownership. For the general population, it is ranked in third place behind getting married and achieving educational aims in terms of life achievements in the ReportLinker’s survey. This may indicate a disconnect between the dream of owning a home and the reality of achieving it.

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Millennial paradox

A closer look at the numbers shows that this disconnect is felt hardest among millennials. The slowdown in homeownership over the past several years has corresponded with the coming of age of the millennials (born 1985-2004). Compared to the general population, only 44 percent of millennials agree that homeownership is the best long-term investment, according to the recent ReportLinker research.

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This reticence is echoed in other research, which shows that, although the millennials are the largest generation in U.S. history, they have been slow to form households, a key indicator of future homeownership. Over the past 10 years, the number of adults under age 30 has increased by roughly 5 million but the number of households formed in that age group has risen by just 200,000.

Moreover, homeownership has slipped to fourth place in the list of life achievements, coming after attaining educational and career aims and getting married, in the ReportLinker study.

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Gen Y against the odds

These numbers suggest that, in an era of stagnant incomes and wage inequality, millennials put homeownership on hold while they worked to first ensure their financial security through education and career development.

They’ve had to do it in an era of rising wage inequality and stagnation. The decision to form a household is closely linked to income, as the “State of the Nation’s Housing 2016” report released by Harvard University’s Joint Center for Housing Studies shows. For example, households earning under $25,000 annually—the ones that face the biggest financial hurdle to buying a home—were the fastest-growing segment in 2005-2015 and represented 44 percent of America’s net growth in households.

When it comes to wage levels, the picture has been similarly morose. Today, with most measures of the labor market signaling full employment in the U.S., wage growth has remained weak. Average wage growth has fluctuated around 2 percent, unadjusted for inflation, between 2002 and 2015, according to a study by the Federal Reserve Bank of San Francisco.

Pragmatic optimism saves the day

While millennials may have borne the brunt of the aftershock of the subprime crisis, it looks like homeownership in this segment is poised to rebound. According to ReportLinker’s survey, being able to own property still remains the top priority for millennials, with 46 percent saying it was their top-ranked long-term financial goal (compared to 43 percent for the general population), which indicates pent-up demand.

Moreover, nearly a decade has gone by since the subprime crisis and millennials aren’t getting any younger. As they age, they are more likely to form households, the precursor to homeownership. According to the Joint Center for Housing Studies report, millennials are expected to form well over 2 million new households each year on average in the years to come, raising their numbers from 16 million in 2015 to a projected 40 million in 2025.

Therefore, it looks like the reports of the death of America’s love affair with homeownership have been greatly exaggerated. And it’s the millennial generation who are coming to the rescue. Hardened by years of lower incomes, wage inequality, living with mom and dad, and renting, they are finally entering the market with big dreams and a clear head.

For more information, visit www.reportlinker.com