2016's Biggest Home Buying Trends
July 29, 2016 / Lou Esposito, Vice President, Strategic Accounts
The real estate market has a habit of defying expectations. As 2015 came to a close, analysts predicted soaring interest rates would put the squeeze on home buyers, house prices would moderate, and sales would rise by only a few percentage points.
Instead, rates plummeted at the start of the year and reached historically low levels in July. In addition, home prices were up 5.9 percent year over year in May, according to CoreLogic, and new home sales have also hit a post-recession high.
All of this is to say that predicting real estate's near-term future is tricky work. But certain trends are more readily apparent. The types of homes buyers look for, where they look for them, and their confidence in the future is backed up with the kind of strong data a forward-looking approach demands.
Home Type (and Size) Matters
The National Association of Realtors' Home Buyer and Seller Generational Trends report sheds light on the types of homes people buy most often. The most popular kind of property continues to be the detached single-family home, accounting for 83 percent of all homes purchased in 2015. The vast majority (84 percent) of single-family homes sold last year were previously owned.
In line with historical trends, renters and younger buyers are most often looking for a home larger than the ones they currently reside in, while older buyers tend to buy smaller or similarly sized properties. The average existing home was built in 1991, was 1,900-square feet, and had three bedrooms and two bathrooms.
A new Pew Research Center study found that, for the first time in the modern era, more 18- to 34-year-olds were living with their parents than were living with a spouse or partner in their own households.
Location, Location, Location
Clichés obtain their status because, more often than not, they prove to be true. That's definitely the case for the old real estate adage emphasizing location above all other considerations in the home-buying process.
According to the NAR, more than one third of buyers of all ages would prefer to live in a suburb—preferably one with close contact between neighbors and the kinds of shops, restaurants, and entertainment more closely associated with urban living.
Despite all the real estate trend articles in recent years that were devoted to the idea that millennials prefer cities to suburbs, 66 percent of millennials say they want to live in the suburbs, according to a 2015 study from the National Association of Home Builders. The group found that millennials are moving out of urban areas at a lower rate than the previous generation, but there is still a large-scale trend of millennials moving to the suburbs, especially when children come into the picture.
Despite Challenges, Outlook Remains Positive
It isn't an easy time to be a home buyer, and prospective young buyers have it particularly rough. A new Pew Research Center study found that, for the first time in the modern era, more 18- to 34-year-olds were living with their parents than were living with a spouse or partner in their own households.
Student debt weighs heavily on the shoulders of entry-level buyers, but limited inventory, high prices, and tightened lending standards impact buyers of every age group. Yet in spite of all that, Fannie Mae's Home Purchase Sentiment Index hit an all-time high in May after falling to an 18-month low in March.
Low mortgage rates, rising incomes, and the promise of a busy summer season have home buyers feeling good going into second half of the year.
Lou Esposito has more than 25 years of mortgage industry experience and has been a vice president, Strategic Accounts for six years. In this role he serves as the primary relationship manager for select domestic and international banks and lending institutions. The Strategic Accounts team is dedicated to serving large-volume customers with the best customer service in the mortgage insurance (MI) industry. Team members work collaboratively with the leadership of lender customers to develop and enhance solutions to meet the needs of borrowers. Esposito's MI experience includes correspondent, retail, and broker loan acquisitions. His background also includes evaluation of strategic alliances, warehouse lending, shared executions, and other secondary marketing opportunities in the whole loan market. He has an MBA in finance and a BS in economics.
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