Home-buying trends are shifting thanks to generational differences, a strong economy, student-loan encumbrances and a growing housing-affordability gap, panelists said Sept. 13 at the Northern Virginia Association of Realtors’ 22nd annual Economic Summit.
Changing buyer characteristics and desires are altering the market, said Jessica Lautz, director of demographics and behavioral insights with the National Association of Realtors.
Only half of American adults are married, versus more than 70 percent in the 1970s, and more unmarried couples are looking for homes, Lautz said during the forum at Northern Virginia Community College’s Annandale campus.
Buyers tend to hang on to their purchases longer, she said. For at least the most recent four decades, first-time home buyers on average have been 32 years old. But the average age of “repeat buyers” – i.e., those purchasing a home for at least the second time – has risen steeply from 36 in 1981 to 54 today, Lautz said.
Buyers, many of them young, also are carrying about $1.4 trillion worth of student-loan debt nationwide, with a median loan debt of $41,200 and median income of $38,800. Those with loans on average delay their home purchases by seven years, Lautz said.
Housing requirements likely will be different in the future, as about half of babies born today may live to age 100, Lautz said. Younger buyers lately have been purchasing homes intended for use by multiple generations, be they aging parents or adult children, she said.
Regardless of other factors, people these days tend to want the same kind of home: a single-family house with three bedrooms and two bathrooms that is located in the suburbs or a small town and within a short distance of family members and close friends, she said.
For all the talk that older generations want to downsize, Lautz said that trend is a fraction of what it used to be.
“Everyone wants the single-family home,” she said. “People downsize 100 square feet, if that. It’s like a closet.”
The nation’s economy and real-estate market are sending out mixed signals, panelists said.
The good news: Young adults are participating more in the workforce, unemployment is low and wages are inching up. But interest rates also are increasing – panelists predicted the Federal Reserve would bump up rates at least once before year’s end – and housing prices and rents are rising faster than incomes, they said.
“A lot of folks are doing really well, but not across the board,” said Donna Hurwitt, director of market intelligence with the Fairfax County Economic Development Authority.
The nation has just a four-month supply of houses and needs about 270,0000 more construction workers, said Stephen Melman, director of economic services with the National Association of Home Builders. High earning prospects could prompt young people to go into that trade, he said.
“Construction incomes perk up the ears of young people,” he said.
Melman predicted modest growth in single-family housing starts, possibly affected by rising lumber prices – “the first boot to drop in the trade war,” he said.
Housing prices in Northern Virginia are rising slowly, possibly because of caution on the part of purchasers, Hurwitt said.
“There seems to be a fair amount of buyer discipline in the market,” she said.
Realtors could entice more first-time buyers into the market by closing the “down-payment knowledge gap” – the assumption that purchasers must put up 15 to 20 percent of a home’s price in order to qualify. The true figure is closer to 5 percent, Lautz said.
About 87 percent of home buyers work with an agent – one of the highest rates ever – and Millennials are more likely to do so than other generations, Lautz said. While home buyers often use technology when conducting their search, Realtors should not fear being displaced, she added.
“Technology and agents are going hand-in-hand,” Lautz said. Buyers, especially Millennials, “want an expert at their side,” she said.