What To Know About Home Buyers This National Homeownership Month
Gary and Jay write in Your First Home, “Markets go up and down. The reality is there’s never really a perfect market—just the market you’re dealing with when you’re buying your home.” The market in 2023 and 2022 has given buyers challenges—and opportunities.
June is National Homeownership Month, and it’s a good time to check in on the challenges and opportunities that buyers are dealing with. To help yourself become the economist of choice for your clients, here are some key takeaways from the National Association of Realtors ® (NAR) annual Home Buyers and Sellers Report. If you want bonus points, you can also check out our recap from last year here.
A perfect storm of low inventory and high interest rates had its biggest impact on those wanting to enter homeownership. What was a tough market became tougher.
• First-time buyers were only 26 percent of overall buyers in 2022, down from 34 percent in 2021.
Not only was this a low annual percentage, but this this a historic low. It is the lowest amount of first-time home buyers since NAR started collecting data in 1981.
• A typical-first time buyer got older.
The average age of a first-time buyer rose to 36 years old, up from 33 years old last year.
Still, even in a hard market, people are becoming homeowners and beginning their lifelong journey with real estate.
• First-time buyers are increasingly nontraditional.
Although many first-time buyers are engaged or married couples, 2022 saw the highest percentage of first-time buyers who were unmarried couples or other nontraditional household configurations. Unmarried couples represented 18 percent of overall first-time home buyers, a historic high.
• The pride of homeownership remains strong.
Over half of first-time buyers (62 percent) reported that the primary reason for purchasing a home was the desire to own a home of their own.
If mortgage interest rates decrease toward the end of the year, as some economists predict, we may see more first-timers enter into homeownership.
High interest rates had a ripple effect throughout the real estate industry throughout 2022 and into 2023. Owners who have mortgages “locked in” to the historic low interest rates of 2020-2021 are reluctant to move and have to increase their cost of living. The result? As Gary said in recent masterminds, “The steepest drop in homes sales since the Great Recession.”
Source: KW Research & US Census Bureau
Still, not all is doom and gloom. There are always people who need to buy and sell real estate, regardless of the market. There are still opportunities for buyers and the agents who work with them. And, as the preceding graph illustrates, just because sales are “down” – the market is still historically busy. Homeowners have record-high equity to help them get into their dream homes.
• Homebuyers are increasingly not just married couples.
In another historic record, 10 percent of recent buyers were unmarried couples. Single women also continued to purchase homes at increasing rates – representing 17 percent of recent buyers. Single man accounted for 9 percent of activity.
• Homes are increasingly multi-generational.
As the cost-of-living increases with inflation, many families are finding buying power and stability in purchasing homes beyond immediate families. Fourteen percent of home buyers purchased a multi-generational home, planning to take care of aging parents, children, and pool resources.
• It’s hard for historically marginalized communities to compete.
Overall, the share of White and Hispanic home buyers increased during 2022, while buyers identifying as Black/African-American, Asian/Pacific Islander, and others decreased.
• People are moving farther.
Between 2018 and 2021, the median distance moved by a home buyer was 15 miles. Over the past year, this increased dramatically up to 50 miles.
• Buyers are paying full-price and then some.
Partially because inventory remains at historic lows, NAR reports that buyers typically purchased their homes for 100 percent of the asking price, with 28 percent paying over asking.
• Speed to lead still matters.
In what seems to be an evergreen trend, being top-of-mind remains critical. A remarkable 67 percent of buyers interviewed only one real estate agent during their home search.
The dream of homeownership is alive and well, and a challenging market means that real estate agents will be able to provide better guidance and service. As the real estate industry keeps its eyes on interest rates, agents would do well to keep their ears to their local markets. By keeping in touch with challenges that might matter most to your area, you’ll be able to help buyers navigate their next big move.
Do these national buyer trends hold true for your local market? Have you noticed any changes in the clients or communities you serve and what their needs are? Let us know on our KellerINK Facebook page. And don't forget to subscribe to our newsletter.