Thirty-five years ago the housing market looked drastically different, with the word “internet” nowhere to be found and the thought of less than a 4% mortgage rate crazy.
The National Association of Realtors, however, has followed the changes every step of the way, releasing its Profile of Home Buyers and Sellers survey since 1981.
“When the Profile of Home Buyers and Sellers made its debut 35 years ago, consumers and Realtors navigated a much different real estate landscape,” said NAR President Tom Salomone on the upcoming survey results.
The survey is the longest-running series of national housing data which evaluates the demographics, preferences, motivations, plans and experiences of recent homebuyers and sellers.
In anticipation of the 2016 survey release on Oct. 31, NAR identified five noteworthy real estate trends since the survey’s inception.
1. Participation from first-time buyers is depressed
First-time buyers fell to 32% of the market, the lowest share since 30% in 1987, according to NAR. Meanwhile, the homeownership rate for Millennials rests at 34.1%, the lowest level since 1994.
NAR attributed the decline to a handful of reasons, including underemployment, repaying of student debt, struggling to save for a down payment and Millennials holding off on marrying and having children.
While sales to first-time homebuyers peaked in 2009 and 2010 at 47% and 50%, respectively, the long-term average is much lower at 39% after excluding the data from the two peak years. During these years, the first-time homebuyer tax credit program available at the time influenced homeownership.
Although some experts warn that the homeownership rate will continue to decrease, Freddie Mac claims that view is overly pessimistic, and even says Millennials are key to future homeownership growth.
“Monthly feedback from Realtors so far this year 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,” NAR Chief Economist Lawrence Yun said.
“A strong majority of current renters under the age of 34 say they want to own a home in the future, but their impending rise will be a gradual one and is not likely to increase substantially in the 2016 survey,” Yun said.
2. The internet is not replacing real estate agents
For comparison, only 2% of buyers used the internet during their home search back in 1995. However, by 2005 that number jumped up to 75% of buyers, and it now sits at 90%.
Despite this increase, both buyers and sellers continue to seek out real estate agents in their home-buying or selling process. The rate of homes that are for sale by owner hasn’t risen above 9% since 2011.
3. Buyers purchasing bigger, but the pace is currently at a standstill
There is a lot of talk about tiny homes of less than 500 square feet being a new trend. For example, San Diego will create its first “micro-housing” as an alternative for residents who want less expensive housing.
Despite this trend, NAR says that the median home size has actually held steady at 2,000 square feet since 2011.
“While many Millennial renters living in urban areas have sacrificed space for proximity to jobs and entertainment, they’ve so far followed previous generations by fleeing to the suburbs for larger and more affordable homes when they’re ready to buy,” Yun said.
“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,” he said. “So far it hasn’t happened.”
4. Down payments have trended down over time, but not in recent years
Back in 1989, the average first-time homebuyer financed their mortgage with a 10% down payment, and the average repeat buyer used a 23% down payment. In 2005 and 2006, that dropped to 2% for first-time buyers. For repeat buyers, the low was in 2012 and 2014 at 13%.
Now, the amount remains relatively steady at 6% for first-time buyers and 13% to 14% for repeat buyers.
5. The home search is taking longer; tight inventory has slowed the pace in the past two years
The number of weeks it takes to buy a home increased over the years, according to the survey. A buyer would normally search for seven or eight weeks to find a home up until 2007. Now, that time has risen to 10 weeks.
“Insufficient supply levels throughout most of the country have forced recent buyers to move quicker to close on a home,” Yun said. “Until new and existing inventory ramps up to meet demand, prospective buyers should anticipate a brisk home search process with not as many homes to choose from as they may like.”