The quickening pace of home sales over the past year included a small rebound from two key segments of buyers who have been missing in action in recent years: first-time buyers and single women.
This is according to the National Association of Realtors’ annual Profile of Home Buyers and Sellers, which also found that for-sale-by-owner transactions remained at an all-time low of 8 percent for the second straight year. Nearly 90 percent of all respondents worked with a real estate agent to buy or sell a home.
After slipping for three straight years, the share of sales to first-time home buyers in the 2016 survey ticked up to 35 percent, which is 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 of first-time buyer transactions is 40 percent.
Lawrence Yun, NAR chief economist, says more new homeowners were able to break through what continues to be a laborious market for many trying to enter.
“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,” he said in a press release. “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).
“Even with the affordability challenges many buyers face, the allure of homeownership is not lost among the younger generation,” Yun continued. “Those under age 35 made up 61 percent of first-time buyer transactions.”
Although the increase in new homeowners is encouraging, their overall share of the market is still subpar, according to Yun. The lack of affordable new and existing inventory, home prices in many markets rising far above wages and difficulty saving for a down payment because of rising rents and student debt 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,” Yun said.
As in year’s past, married couples once again made up the largest share of buyers (66 percent) and had the highest income ($99,200). However, the survey revealed that single women made up more of the buyer pie than in recent years. 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 since 2011.
“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 said. “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).
Downpayment sizes have roughly stayed 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-down payment Federal Housing Administration-backed 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,” NAR President Tom Salomone said. “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.”
Similar to recent years, 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 four 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.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.