Unlike putting out Christmas decorations with the Halloween candy, some forms of early preparation actually make sound business sense. Namely, understanding the current real estate consumer mindset so that you’re ready for what’s coming down the road.
Realtor.com’s Active Home Shopper Report (based on September survey data) analyzed the responses of realtor.com site visitors who have their sights set on buying a home next year during peak season — spring or summer.
The results, released today, “point to a big shift ahead” in the 2017 market defined by five significant findings:
First-time buyers out in force
In September 2015, just over a third of shoppers on realtor.com identified as first-time homebuyers. Heading into 2017, that number jumped to over half of all house hunters (52 percent).
The top homeownership goals of this buyer pool, however, remain consistent: privacy, family needs and wealth accumulation/financial investment that will grow over time.
“This represents an ‘oh shift’ moment in housing,” said Jonathan Smoke, chief economist for realtor.com, in a press release. “With so many first-time buyers in the market, competition will be even fiercer next year for affordable starter homes in the suburbs.
“Those looking to buy may want to consider a winter home purchase in order to avoid bidding wars and higher prices spurred by a potential increase in millennial buyers.”
Millennials will make up the biggest piece of first-time buyer pie (61 percent), according to the survey, which means the majority of these prospective homeowners are poised to be under the age of 35. The three main homeownership drivers for this young group include:
- Getting married or moving in with a partner
- Growing tired of their current living space
- Planning to increase family size
No. 1 homeownership barrier set to change
Thanks to inadequate new home construction and crazy low interest rates, we’ve heard a lot this year about inventory crushing homebuyer dreams as prices skyrocket (while incomes stay flat) and homes rapidly fly off the market.
This 2016-defining issue has been particularly acute in bigger cities in direst need of more homes on the market, including New York City, Dallas, Houston, Atlanta, San Francisco, Miami, Chicago, Seattle, Denver and Phoenix.
But per realtor.com’s first-time homebuyer outlook, the inventory plague (which 40 percent of shoppers cited as the largest barrier to homeownership in 2016) could very well take a backseat to bigger problems.
The survey notes that mortgage qualification issues (including down payments and credit scores) as well as affordability may challenge inventory as the most prevalent obstacles to homeownership in 2017.
Specifically, 37 percent of first-time homebuyers said their largest barrier to a 2017 purchase is presenting the funds for a down payment, while 30 percent worry about finding a home within budget.
Favored home features lean toward family and finance
The survey also asked home shoppers to distribute 100 points across 20 home and neighborhood attributes. That revealed the most important features for shoppers in general include:
- Quality of construction
- Larger yard/lot space
- Safer neighborhood
First-time homebuyers seek a home that will provide safety, more living space and a larger yard.
“As millennials marry and move in with partners, reasons to purchase are driven by actual or planned growth in their families, and they show strong preference for single family homes (39 percent) or townhomes (32 percent) and away from multi-family homes (15 percent), condos (10 percent), or mobile homes (2 percent),” the report noted.
Who said the suburbs weren’t cool?
Definitely not first-time buyers, many of whom have “families and safety on the brain,” realtor.com said in a press release.
But the suburbs appear to be universally popular across homebuyer pools, as these quiet, approachable locales (both closer-in and outlying) were the top preference for 50 percent of all survey respondents.
“Data also show younger homebuyers are more likely than their older counterparts to prefer urban living, the second-most common location preference among millennials after suburbs,” the report noted.
No surprise here: prospective buyers eye spring and summer
Although home sale prices have shown to be highest in the summer, softer in the fall and lowest in the winter, the majority of realtor.com survey respondents plan to purchase in about seven months or more, which lands them in the heart of spring heading into summer.
The majority of home shoppers (73 percent) said they had been thinking about homeownership for less than three months and weren’t planning to immediately take the plunge.