NAR’s 2019 survey finds the percentage of first-time buyers at historic lows – and many of the ones who do enter the market get financial help from their family.
SAN FRANCISCO – With housing costs rising and no signs of deceleration, many first-time buyers turn to their families for help. In spite of this, the percentage of first-time buyers remains at historic lows, according to the National Association of Realtors® (NAR) 2019 Profile of Home Buyers and Sellers. NAR releases the report yearly. It covers demographics, preferences and experiences of buyers and sellers across America.
Initial results find that a third of first-time home buyers received down payment help from family and friends. The share of first-time home buyers remained at 33% in 2019 – a percentage that continues to be below the historical norm of 40%.
“Pre-recession, the number of first-time buyers was higher, in part, because buyers had more options,” says NAR President John Smaby. “However, over the past few years, we have unfortunately experienced scarcity in housing inventory, especially at the middle- and lower-end of the market.”
Buyers report the most difficult step in the process is just finding the right home to purchase, and what buyers want most from their real estate professional is to help them find the right home to purchase, according to NAR Chief Economist Lawrence Yun. “Low inventory conditions hurt would-be first-time buyers most,” he says. “Their homeownership dream and the opportunity to build wealth gets delayed until more inventory choices reach the market.”
Although tightened inventory has taken a toll on home seekers and raised median home prices, sellers in many U.S. areas have benefited. Over the one-year period, sellers received a median of 99% of their asking price and sold their homes typically within three weeks.
Fewer sellers reported a delayed selling this year because their home was worth less than their mortgage. This share of sellers declined from 9% in the 2018 report to 7% in 2019. However, 20% of sellers who bought their home 11 to 15 years ago – during the pre-recession years – reported a stalled home sale.
Homebuyers’ behaviors change
The NAR report found that the share of new homes purchased dropped to an all-time low of 13% – yet another indication of a significant inventory deficiency. Also, 23% of first-time buyers moved from a family or friend’s residence directly into their home – nearly twice the historic rate of 12%.
The age of repeat buyers – which has steadily increased over the course of several decades – continues to show a notable increase. In the 1980s, the average repeat buyer age was in their mid-30s; today, the average repeat buyer is in their mid-50s.
Yun says no area has seen a more rapid and consistent increase than the median age of repeat buyers, which was at a record-high of 55 years old in both 2018 and 2019. However, the median age for first-time buyers also increased to 33 years old in 2019 – the highest share recorded in the series history. However, the share of senior-related housing purchases was 12% in 2019, a slight decline from one year ago.
Yun says the demographics of home buyers shifted as home prices crept higher. “Buyers and sellers, individuals and families – they all had to adjust to changing market conditions.”
- 35% of all buyers had children under the age of 18 living at home, an increase from 34% last year but a drop from a high of 58% in 1985.
- 12% of homebuyers purchased a multi-generational home, which consists of a home with adult siblings, adult children over the age of 18 and parents or grandparents – or both – within the same household. Respondents gave varying reasons: 44% did so to accommodate aging parents, 34% to accommodate adult children and 29% to save money.
- The share of married couples who purchased their first home continued the decline from a historical high of 75%. Although the percentage of married repeat buyers remained constant at 67%, the share of first-time buyers who were unmarried couples rose to a historical high of 17%.
- Buyers purchasing first homes as roommates jumped to 4% from 2%.
- 14% of recent home buyers own more than one home, down from 17% in 2018. Owning more than one property was most common for homebuyers 65 years old and older, at 19%.
- Overall, the internet has become the main source for buyers in terms of finding a home that they ultimately purchase. Today, 52% of recent buyers found their home while searching online, an increase from last year’s 50% share. In 2001, only 8% of buyers found their home this way.
- Finding a home through a Realtor or an agent has shifted from being the most common source for finding a property to the second most common. While more traditional sources – yard signs, relatives and neighbors, friends and home builders – remain at last year’s levels, they all have declined as a primary source through recent years as the internet became the go-to information source.
Embracing industry changes
While the housing market has changed and transitioned, the NAR report finds that many changes had positive impacts, especially in regards to the home down-payment requirement. In 2019, the median down payment was 12% for all buyers, 6% for first-time buyers and 16% for repeat buyers. Lower down payments among home buyers are another result of rising home prices as buyers find it difficult to save: 17% of all buyers and 25% of first-time buyers used an FHA loan to purchase, likely taking advantage of low down payment programs.
NAR’s survey asked home buyers about their personal experience with securing a mortgage. In 2019, 31% said obtaining a mortgage “was more difficult than expected.” Although a considerably higher amount of people had this same answer in 2009 and in 2010, fewer respondents have had this response every year since then.
“Today, repeat buyer behavior is more similar to first-time buyer behavior as tenure in home has increased,” says Jessica Lautz, vice president of demographics and behavioral insights at NAR. “All buyers are doing their homework – going to open houses, following housing news – and are more reliant than ever on the expert advice of real estate agents and brokers.”
Lautz’s observation about Realtors®’ contributions is echoed in the report’s findings:
- 89% of those who sold a home worked with a real estate agent in the transaction, and personal relationships and connections were said to be the most important feature of the agent-buyer/seller bond in both 2018 and 2019. Agents most commonly received referrals from customers’ friends, neighbors or relatives, according to the report.
- Buyers most want their agent to help them find the right home to purchase. Buyers also wanted assistance in negotiating the terms of sale and help with price negotiations.
- Homebuyers typically interviewed only one real estate agent before deciding to work with them, and said the most important factor was that the agent was honest and trustworthy. In addition, agent experience was another important factor.
- Overall, recent buyers were pleased with their real estate agent’s skills and qualities: 90% said that they “very satisfied,” and would use their agent again or recommend the agent to others.
- The typical home seller this year was 57 years old, with a median household income of $102,900. Sellers said they ultimately sold their homes for a median of $60,000 more than they purchased it.
- The most frequently cited reason for selling (16% of those surveyed) was a desire to move closer to family and friends – the first time it’s been the top-cited reason in the series’ history. The next most common reason was that the home was too small, and the third was job relocation at 11%.
- Sellers typically lived in their home for 10 years before selling it, an increase from last year’s share, and higher than the historical tenure of six years.
- 66% of sellers were “very satisfied” with the overall selling process.
- Only 8% of recently sold homes were for-sale-by-owner sales, or FSBO – a number that’s close to the lowest share recorded since NAR began collecting records in 1981. The median age for FSBO sellers is 60 years, and 65% of FSBO sales were married couples with a median household income of $94,000. FSBOs sold for less than other residences at a median of $200,000, compared to agent-assisted homes that sold at a median of $280,000.
- 48% of all sellers bought a newer home than their previous home, while 28% purchased a home the same age and 24% purchased an older home.
- 44% “traded-up” and purchased a home that was more expensive than the one they just sold, while 30% bought a less expensive home and 26% purchased a home that was similar in cost. Sellers who are 64 years of age and younger generally bought a more expensive home than the one they just sold. Those aged 18 to 34 purchased the most expensive trade-ups in 2019, recording an increase of $110,000. Conversely, sellers aged 65 and over typically bought a less expensive home.
© 2019 Florida Realtors®