In the hottest housing market since the pre-Great Recession peak, home sellers are in the driver’s seat. Most of these salespeople are baby boomers and they pose as bandits.
According to the National Association of Realtors® 2021, sellers earned an average of $66,000 on the sale of their homes, an increase of $6,000 from the previous year. Report on Generational Trends of Home Buyers and Sellers.
The report only covered the first few months of the COVID-19 pandemic, as it was based on a survey provided to people who bought a home from July 2019 to June 2020. About 8,200 new homeowners responded to the survey from 131 questions.
“In a real estate market tilted in favor of sellers, baby boomers and older homeowners are really the ones who hold the cards,” says realtor.com® Chief Economist Danielle Hale. Those who sell homes can use the profits to help them buy new ones, she adds, pointing out that they are “generally better equipped to deal with market conditions”.
The pandemic has led to lower mortgage rates, fewer properties for sale and a rush of buyers looking for their own home. All of this means homes are selling fast and at high prices.
In this supercharged market, sellers got around 99% of what they asked for, and more in many cases. The homes only lasted about three weeks on the market before being picked up.
Baby boomers made up the most sellers, at 43%. Their main reason for putting their property up for sale was to buy a similar sized house closer to family and friends. This has become even more important during the pandemic. Their second most popular motivation for selling was to downsize.
High prices and fewer homes for sale have made it even more difficult for young buyers, especially first-time buyers. Millennials made up the largest share of buyers, at 37%, while 31% of all successful buyers were first-time buyers. (About 82% of millennials, ages 22-30, and 48% of older millennials, ages 31-40, were first-time homebuyers.)
“Millennials have a lot of headwinds entering the real estate market,” says Jessica Lautz, vice president of demographics and behavioral insights at NAR. “There are not enough homes for buyers who want to be able to buy.”
Almost 60% of buyers between the ages of 22 and 40 said the biggest barrier to buying was finding the right home. More than half of all shoppers cited the same concern.
Young buyers were also the most likely to pay more than the asking price to secure a home.
“In a market where competitive offers are the norm in many areas, it is interesting to note that young buyers are more likely to pay than to ask [price]says Hale. “They have longer professional careers, so they [may be] more willing to take risks.
What types of houses are most in demand?
Buyers were clamoring for detached single-family homes, the kind that typically come with a backyard and garage. These accounted for 81% of sales. These homes had a median area of 1,900 square feet and were typically built in 1993.
These homes likely became even more desirable as the pandemic dragged on and families realized they needed more space to accommodate home offices and distance learning.
Existing houses (as opposed to newly built houses) also dominated. This is because they are cheaper and there are simply more of them. Only about 15% of sales were for new homes, with older baby boomers, aged 66 to 74, buying the largest share, 19%, of new construction.
About 50% of all buyers bought in the suburbs, while 22% preferred small towns and 13% chose rural areas. Only 13% opted for urban areas. Three percent chose resort communities.
Buyers of all generations expected to live in their homes for about 15 years. They also moved a median distance of 15 miles from their previous residences.
Gen X bought the most multi-generational homes
About 12% of buyers opted for multigenerational homes, with Gen X buying the highest percentage, 18%, of these residences. This gave them the space to accommodate elderly parents, who might need help, and adult children.
“They are buying multi-generational homes [to] caring for aging parents and keeping them out of care rooms or caring for young children who may not be able to attend daycare or daycare due to the pandemic,” says Lautz. “The other big reason is the pooling of income so you can buy a bigger house.”
About 24% of shoppers were Gen Xers, between the ages of 40 and 54. This smaller generation was most likely to have children with nearly two-thirds, 41%, with children under 18 living with them.
This generation was also at the peak of their careers, making them the highest earning buyers, with a median household income of $113,300 in 2019. They bought the largest and second most expensive homes, spending on average $305,000 for a median of 2,100 square feet.
Who are today’s buyers?
Buyers who bought homes had a median income of $96,500 in 2019.
Almost two-thirds were married couples, at 62%, while 9% were unmarried couples. Single women made up 18% of buyers, double the 9% of single men.
“Single women remain a strong buying force,” Lautz said in a statement. “A number of divorced women and widows recently have purchased homes without the help of a spouse or roommate.”
People of color made up about 20% of all homebuyers. Whites made up about 83% of shoppers, compared to just 7% of Hispanics, 5% of Asians, 5% of blacks and 3% who identified as other. (Participants could identify with more than one race.)
Veterans and military personnel also made up 20% of all buyers.
An overwhelming majority of buyers, 87%, financed their purchases. Young buyers were the most likely to rely on their savings to build their down payment. Student debt and other types of debt made it harder for them to save, which delayed their purchase by about three years. (Millennials had a median student debt of $25,000 compared to older millennials with a loan balance of around $33,000.) Just over a quarter, 28%, received a gift or a loan from a friend or family member to help with the purchase.
Older buyers, such as baby boomers, were more likely to use the money they earned from selling a home to buy a new home.