This year marks 35 years of the National Association of Realtors’ Profile of Home Buyers and Sellers, and to commemorate the latest survey’s Oct. 31 release, NAR spotlighted five integral ways that housing has changed in those 35 years.
Here are those changes:
1. Less first-time buyer participation
NAR’s 2015 survey showed that the participation rate of first-time homebuyers is at 32 percent, the lowest since 1987 (30 percent). Furthermore, the U.S. Census Bureau showed that between the homeownership rate for Americans aged 18 to 35 is currently 34.1 percent, the lowest rate since 1994.
The reasons for the decline are varied. Young adults are facing hardships that began with the Great Recession, including unemployed and underemployment. Additionally, there is student debt, the inability to save up for a downpayment, and the fact that young adults are waiting until marriage or the birth of a child as the initiative to purchase home – life events they are delaying further and further.
Lawrence Yun, NAR’s chief economist, said that he doesn’t see the participation of first-time homebuyers going up, based on the monthly feedback from Realtors. “The feedback indicates that sales to first-time buyers have remained subdued in today’s tough market of swiftly rising home prices and meager supply levels at affordable prices,” Yun said.
2. Buyers still prefer real estate agents to the Internet
Internet usage in the homebuying process has increased exponentially, rising from 2 percent of homebuyers in 1995 to 90 percent today. However, when it comes to the actual buying and selling of homes, 90 percent of the consumers say they still worked with a real estate agent.
Surveys showed that the market share of for-sale-by-owner transactions is now at 8 percent, its lowest ever. FSBO transactions have not exceeded 9 percent since 2011, and peaked in 2003/2004 at 14 percent.
3. Looking for a bigger space
Single-family homebuyers purchase properties with an average space of 2,000 square feet, which is 300 square feet more than 35 years ago.
While it is true that Millennials have chosen to sacrifice space for proximity to jobs and entertainment (mainly by renting in urban areas), they have also followed the foot steps of previous generation. Millennials, NAR found, move out to the suburbs for larger and more affordable homes once they are ready to buy. Yun added, “It’ll be interesting to see in coming years if the typical home size shrinks as Baby Boomers downsize, and if there’s a shift towards more young buyers opting for less space to live closer to city centers. So far, it hasn’t happened.”
4. Slight decrease in down payments
Though down payments have remained at a similar level in recent years, they are still much less than than they were before. The earliest NAR data shows that historically, first-time buyers had to put down 10 percent on their purchase, while repeat buyers had to put down 23 percent. In recent years, first-time buyers have only had to finance around 6 percent, and for repeat buyers, the share is down to 13-14 percent.
5. Buyers are taking longer to search due to less inventory
Contrary to popular belief, the home search process takes longer today than in the past, with one main reason behind it – the shortage of inventory.
From 1987 to 2007, buyers usually spent about seven to eight weeks before purchasing a property. That time span increased to 10 weeks in 2008, and through 2013, it stood at 12 weeks, though since then, it has hovered around 10 weeks.