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December 2016

First-time buyers, women make up growing share of home buyers

They're back!

2016 Profile of Home Buyers and Sellers coverReversing a downward trend for the past three years, the share of first-time home buyers ticked up to 35 percent in a new survey by the National Association of REALTORSĀ®. That's the highest number since 2013, when it was 38 percent, and a revival from the near 30-year low of 32 percent in 2015.

Another noteworthy nugget from the 35th edition of NAR's Profile of Home Buyers and Sellers is the growing presence of single women. This segment accounted for 17 percent of total purchases, the highest number since 2011 when it reached 18 percent.

Single women account for a growing share of the home buyer pie, according to new research from the National Association of REALTORSĀ®. The 35th edition of also revealed a small rebound of first-time buyers.

For-sale-by-owner (FSBO) transactions remained at 8 percent, marking an all-time low for the second straight year. Married couples continued to make up both the largest share of buyers, at 66 percent, and the highest income, at $99,200, according to NAR's findings.

The comprehensive report is based on responses to 132 questions covering demographic characteristics of home buyers and sellers, their experiences in the home transaction processes, the use of real estate agents and more.

Other key findings in the report included:

  • The share of first-time home buyers was 35 percent, up from the year-ago figure of 32 percent.
  • Two-thirds of recent buyers (66 percent) were married couples, 17 percent were single females, 7 percent were single males, and 8 percent were unmarried couples.
  • Veterans made up 18 percent of recent home buyers, with another 2 percent identifying as active-duty service members.
  • 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 edging up from 31 the past five years. For repeat buyers, the typical age was 52, a year younger than the previous year.
  • More than one in every 10 buyers (11 percent) purchased a multi-generational home. These buyers cited the need to take care of aging parents, cost savings, or adult children moving back home as reasons for their decision.
  • Detached single-family homes continue to be the most common style for 83 percent of recent buyers.
  • Down payment amounts are held steady in recent years at around 6 percent for first-timers and 14 percent for repeat buyers.
  • Tight inventory is affecting the home search process. Buyers typically search for 10 weeks and say their biggest challenge is simply finding the right home to purchase.
  • Tenure in the home has returned to a peak of 10 years, a rise from the historical average of six to seven years.
  • Among recent buyers, 44 percent said the first step they took in the process was to look online, while 17 percent first contacted a real estate agent.
  • Not surprisingly, mobile devices and tablets are an increasingly popular resource for home buyers. Their usage rose to 72 percent in this year's survey, up from 61 percent a year ago and 45 percent in 2013. Nearly six of every 10 buyers (58 percent) indicated they found the home they purchased on a mobile app.
  • Home prices increased slightly this year to a median of $227,700 among all buyers. Purchasers typically paid 98 percent of the asking price.
  • As in past surveys, for-sale-by-owner (FSBO) homes typically sold for less than the selling price of other homes ($185,000 last year), but they usually sold quicker than agent-assisted homes, often because these homes are sold to someone the seller knows.

Researchers at NAR said the latest survey "convincingly proved once again that the two most popular resources for home buyers remain the internet (95 percent) and real estate agents (92 percent)."

"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 REALTORĀ® can provide," said NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida.. "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."

A record-high 51 percent of buyers said they found the home they purchased online, yet most buyers who used the internet still ended up purchasing their home through an agent (90 percent). A similar number (89 percent) of sellers sold their home with an agent. Eighty-eight percent of buyers would use their agent again or recommend that agent to others.

Survey respondents confirmed the value of relationships. Referrals and repeat business remain a large source of new opportunities for real estate brokers. Nearly two-thirds of sellers said they found their real estate agent via a referral from a friend, neighbor or relative, or used their agent from a previous transaction.

Lawrence Yun, NAR chief economist, noted more new homeowners were able to break through what continues to be a difficult 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.

Yun attributes increased demand to a robust job market for those with college degrees, as well as 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; in 2014 the figure was 53 percent).

Added Yun, "Even with the affordability challenges many buyers face, the allure of homeownership is not lost among the younger generation. Those under age 35 made up 61 percent of first-time buyer transactions."

Although encouraged by the increase in new homeowners, Yun believes their overall share of the market is still subpar. He points to the lack of affordable new and existing inventory, home prices in many markets rising far above wages, and difficulty saving for a down payment due to rising rents and student debt.

"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," added Yun.

Survey participants encompassed a nationally representative sample of owner-occupants who were invited to respond via paper or online, and in English or Spanish. Investors and buyers of vacation homes were excluded.