With a full year of pandemic housing data, it's becoming more clear how home buyer and sellers have changed due to COVID-19.
In a short amount of time, the pandemic altered many parts of daily life, including how people buy and sell homes.
The National Association of Realtors® has been surveying recent home buyers and sellers for 40 years, creating an annual snapshot for how and why people enter the housing market. This year’s survey covers transactions from July 2020 to July 2021 and is the first to be completely composed of transactions that took place during the pandemic.
As such, it provides a unique window into how the pandemic changed buying and selling homes.
Here are three takeaways from this year’s survey:
Between low interest rates, remote work flexibility, desire for more space, and a low risk investment during a time of economic turmoil, there were plenty of reasons to buy a home during the pandemic. However, the desire to be closer to friends and family became more prominent in the last year.
Eighteen percent of recent sellers cited being closer friends and family as the primary reason for selling their home, followed by “it was too small” (17%), and “neighborhood has become less desirable" (11%).
That’s a substantial change from the previous year when only 15% cited friends and family as a reason to move.
Social features also played a bigger role for buyers choosing a home. Desire to be close to friends and family surpassed “convenience to job” and “affordability” to become second-most desired home characteristics. The top characteristic was quality of neighborhood.
Even with social life playing a larger role in homebuying decisions, buying a house was still largely seen as a good financial decision. Eighty-six percent of recent homebuyers viewed their purchase as a good investment, compared to 83% last year.
The average age of homebuyers continued to increase in line with a 40-year trend. When the NAR survey began in 1981, the average first-time homebuyer was 29 years old compared to 33 years old in 2020 and 2021.
More substantial is the increase in average age of repeat buyers. Forty years ago, the average repeat buyer was 36 years old. In 2021, the average age hit an all-time high of 56 years old.
|Year||Avg. Age of First-Time Buyer||Avg. Age of Repeat Buyer|
This is likely due to a combination of factors. First, the record run-up in home prices in 2021 gave older repeat buyers an advantage over younger first-time buyers. Repeat buyers were able to use proceeds from their home sales to bring more cash to the table for the recent purchases.
Younger buyers with less cash and no home equity found it harder to compete over limited inventory. The typical down payment for first-time buyers was 7% compared to 17% for repeat buyers.
Student debt and age demographics likely play a role as well. In the early ages for repeat home purchases, Generation X is a small generation that holds over 38% of the total national student loan debt with an average balance of $45,095 per person.
Meanwhile, boomers are a larger generation with less student debt and more home equity. The survey data suggests that these older buyers are making up a larger share of repeat home buyers.
Millennials are entering prime first-time homebuying age, but nearly 15 million of them have student debt -- more than any other generation -- which is delaying homeownership. Twenty-nine percent of first-time homebuyers said saving for a down payment was the most difficult step in the homebuying process.
After uncertainty early in the pandemic, eager buyers competing over limited inventory has made 2021 a banner year for sellers. Homes are selling faster and for more money than ever before.
According to the survey, recently sold homes were on the market for a median of one week this year compared to three weeks in 2020. That’s a substantial change in just one year and a boon for sellers looking to make a quick sale.
Sellers also found it easier to attract buyers. Last year, nearly half (46%) of sellers offered incentives to attract buyers. That dropped to 26% percent during this year’s extremely seller-friendly market.
In addition to selling faster and offering less incentives, sellers also enjoyed a greater return on investment this year. Recent sellers sold their homes for a median $85,000 more than what they purchased for, up from $66,000 last year.
Altogether, that led to more satisfaction with the process. Ninety-two percent of sellers were at least somewhat satisfied with the selling process, compared to 69% last year.
While the pandemic shifted the housing market to favor sellers, some of its effects will be short-lived.
Interest rates are expected to increase in the next year as the Federal Reserve tapers its stimulus spending, which should dampen demand. Meanwhile, housing inventory will increase as labor and supply chain issues untangle and sellers feel more comfortable listing their homes.
The housing market will slowly rebalance toward a pre-pandemic norm. However, it remains to be seen which social and psychological effects remain.