The profile of today’s homebuyer is changing and reveals some surprises. Current first-time homebuyers are older and more likely to be single than first-time homebuyers in the 1970s and 1980s, according to a new Zillow analysis.
The study found that Americans are renting for an average of six years before buying their first homes. In the 1970s, they rented for an average of 2.6 years.
They’re also spending a bigger chunk of their incomes to buy. In the 1970s, first-time homebuyers bought homes that cost about 1.7 times their annual income. Now they’re buying homes that cost 2.6 times their annual income.
Part of that can be attributed to the housing markets millennials are moving into: more expensive cities on the coasts where there are growing job markets.
The average first-time homebuyer is about 33, at the front end of the millennial generation. Their median income is $54,340, which is about the same as what first-time homebuyers made in the 1970s, when adjusted for inflation.
In the late 1980s, 52 percent of first-time homebuyers were married. Today, only 40 percent are married, it was noted in a Zillow report.
“Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home,” said Zillow chief economist Dr. Svenja Gudell.
“We know millennials value homeownership and want to buy. The next challenge will be figuring out how they can save for a down payment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes.”
Q: Are home sales rising?
A: Yes, but only slightly. Pending home sales were mostly unchanged in July, but rose modestly for the sixth time in seven months, according to the National Association of Realtors.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, marginally increased by 0.5 percent to 110.9 in July, from an upwardly revised 110.4 in June, and is now 7.4 percent above July 2014 (103.3). The index has increased year-over-year for 11 consecutive months and is the third-highest reading of 2015, behind April (111.6) and May (112.3).
Lawrence Yun, NAR chief economist, says the housing market began the second half of 2015 on a positive note, with pending sales slightly rising in July. “Led by a solid gain in the Northeast, contract activity in most of the country held steady last month, which bodes well for existing sales to maintain their recent elevated pace to close out the summer,” he said.
Q: Are home foreclosures and all-cash transactions decreasing?
A. Yes, most analysts report lower numbers for these situations. RealtyTrac, a source for housing data, released its July 2015 U.S. Home Sales Report, which shows sales of properties in foreclosure and cash sales were down from a year ago to multi-year lows.
At the same time, year-to-date U.S. home sales in 2015 are at an eight-year high, and the U.S. median home price in July was at an 82-month high, it was reported.
Q: Are homes becoming more affordable?
A: Many buyers are finding themselves in an affordability squeeze. Even with rising home prices over the past few years, many homeowners who have considered selling are deciding not to because they are caught in an affordability squeeze that is compounded by a lack of inventory, according to findings from the California Association of Realtors.
More than one-third (35 percent) of homeowners have considered selling their home in the past year, and of that share, about two-thirds (64 percent) are reluctant to sell because they are finding they can’t afford the home they really want, the survey found.
CAR’s Survey of California Homeowners also found that more than half (59 percent) of homeowners have not seriously considered selling their home in the past year, with more than half (60 percent) saying their current home will be their retirement residence.
For those who have been in their home 15 years or more, that figure rises to 70 percent who indicated they have not considered selling because their current residence will be their retirement home.
But for others (44 percent), the affordability crunch, higher property taxes and home prices are keeping them in their current home.
WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.