First-time buyers may be entering the U.S. home market in greater numbers than industry watchers had assumed.
Nearly half of sales in the past year went to people who were buying their first home, according to a survey released Tuesday by the real estate firm Zillow. That’s a much higher proportion of the market than some other industry estimates had indicated.
Zillow’s survey results suggest that this year’s growth in home sales has come largely from a wave of couples in their 30s, who are the most common first-time buyers. If that trend were to hold, it could raise hopes that today’s vast generation of 18-to-34-year-old millennials will help support the housing market as more of them move into their 30s.
That’s among the findings in a 168-page report by Seattle-based Zillow. Its survey also found that home ownership is increasingly the domain of the college-educated. And it indicated that older Americans who are seeking to downsize are paying premiums for smaller houses.
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Here’s a breakdown of Zillow’s findings:
▪ First-time buyers make up a larger chunk of the housing market than the real estate industry has generally thought.
Forty-seven percent of purchases in the past year went to first-time buyers. Their median age was 33. By contrast, surveys from the National Association of Realtors have indicated that first-timers account for only about 30 percent of all buyers.
The difference between the two surveys may stem from their methodologies. The NAR has used a mail-based survey for its annual figures, while Zillow used an online survey that might have generated more responses from younger buyers.
▪ No college? Dwindling chance of homeownership.
It’s become harder to realize the dream of home ownership without a college degree. Sixty-two percent of buyers have at least a four-year college degree. Census figures show that just 33 percent of the U.S. adults graduated from college. The gap between the education levels of homebuyers and the broader U.S. population indicates that workers with only a high school degree are becoming less likely to own a home.
This is a major shift for the middle class. Just 12 percent of homeowners in 1986 were college graduates, according to government figures. The trend is driven in part by falling incomes for people with only a high school degree.
▪ Millennial home buyers are increasingly Hispanic.
Out of the 74 million U.S. households that own their homes, a sizable majority – 77 percent – are white. But these demographics are changing fast. Only 66 percent of millennial homeowners are white. The big gains have come from Latinos, who make up 17 percent of millennial homeowners but just 9 percent of all homeowners.
Asians also make up a greater share of millennials. This means that as today’s millennial generation ages, the housing market may look considerably more diverse than it does now.
▪ Older Americans aren’t just downsizing; they’re also upgrading.
The so-called “silent generation” – those ages 65 to 75 – bought homes in the past year with a median size of just 1,800 square feet, about 220 square feet smaller than the homes they sold. But that smaller new home still cost more. These retirement-age buyers paid a median of $250,000, nearly $30,000 more than the home they sold. In some cases, the higher purchase price likely reflects the profits from the sale of their previous home, in other cases a desire by upscale buyers for luxury finishes and amenities.
▪ Starter homes are no longer popular.
When millennials buy, they’re leapfrogging past the traditional, smaller starter home. This younger generation paid a median of $217,000 for a 1,800-square-foot house. That median is nearly identical to what older generations buy.
Across the United States, the typical home costs $222,000, has three bedrooms, 2 1/2 baths and 1,900 square feet. For someone with children at home, that figure swells to 2,000 square feet and a median price of $234,000.
▪ Most buyers lose their first bidding war.
Because there’s a shortage of homes listed for sale, most would-be buyers fail on their initial bid. Just 46 percent of buyers succeeded in getting the first home on which they made an offer. The failed offers are a reason why a typical home search now takes an average of 4.2 months.
▪ Younger buyers still love the suburbs.
It’s often assumes that millennials dislike the suburbs, choosing instead to live in cities with walkable commutes and lazy Sunday brunches. But the Zillow survey shows that only a quarter of millennial homeowners live in urban areas. That is slightly larger than previous generations. But 47 percent of millennial homeowners live in the suburbs, a sign that the era of the cul-de-sac is far from over.