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NAR: Millennials Dominate Home Buying Market, Generation Z Now Active Buyers as Well
WASHINGTON—The popularity of multigenerational homes increased over the last year, as a rising number of homebuyers purchased larger residences compared to prior years, including millennials who continue to make up the largest share of homebuyers at 37%, the National Association of Realtors reported on March 16.
The finding is one of a number of trends cited in the National Association of Realtors’ most recent study on the characteristics of homebuyers in the “2021 Home Buyers and Sellers Generational Trends report.”
Millennials have been the largest share of buyers since NAR’s 2014 report. The most recent data shows that 82% of younger millennials and 48% of older millennials were first-time homebuyers, more than other age groups.
According to the study, during the last year, 18% of homebuyers between the ages of 41 to 65 purchased a multigenerational home—a home that will house adult siblings, adult children, parents or grandparents.
“There are a variety of reasons why large families and extended families are opting to live together, one of which is that it’s a great way to save money,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “Also, in light of the pandemic, many grandparents and older relatives found that being under a single roof—quarantining with family rather than away—worked out better for them.”
Homebuyers ages 75 to 95 were the second most likely to purchase a multigenerational home, and were most likely to purchase senior-related housing, at 27%.
With inventory levels being alarmingly low in recent years and even dropping to record-low levels last year, a number of would-be homebuyers consequently had difficulties finding adequate housing options. Nearly six in 10 homebuyers between the ages of 22 to 40 said just finding the right property was the most challenging step in the buying process. More than half of all homebuyers (53%) cited finding the right property as the most difficult step.
Twenty-eight percent of homebuyers between the ages of 22 to 30—those who make up younger millennial buyers—lived with parents, relatives or friends before purchasing. This is higher than any other generation. Living with family first tends to allow flexibility toward saving for a down payment and finding a home, given the low housing inventory.
Twenty percent of homebuyers between the ages of 22 to 30 were unmarried, a decline from 21% from a year ago. Additionally, 22% of homebuyers between the ages of 66 and 74 were single women.
“Single women remain a large buying force,” said Lautz. “A number of divorced women and those who were recently widowed purchased a home without the help of a spouse or roommate.”
In terms of buyer characteristics, 19% of older boomers—buyers between the ages of 66 and 74—and 18% of Generation Xers – buyers ages 41 to 55—were most likely to purchase a new home to prevent having to do renovations or avoid plumbing or electricity problems, and these buyers prioritized having the ability to choose and customize design features.
Seventeen percent of buyers who are part of the silent generation—those between the ages of 75 to 95—purchased newly-built homes. These buyers were least likely to compromise in their home search and least likely to purchase a detached single-family home.
As is always the case in real estate, location proved to be an important component among buyers. Fifty-four percent of homes purchased by homebuyers ages 31 to 40—older millennials—were located in a suburb or subdivision. Out of this age group, 69% said the quality of the neighborhood influenced their neighborhood selection. That sentiment was shared by buyers ages 22 to 30 to the tune of 65%. However, an even stronger factor among this 22-to-30 age bracket was “convenience to workplace,” as 74% cited that when deciding on a neighborhood, proximity to where they worked was imperative.
“The younger millennials overwhelmingly answered that they prefer to live closer to work, as many don’t want a long commute and this was evident in their buying habits,” said Lautz. “Additionally, both of these groups also placed a high value on being close to family and friends as 57% said that dynamic factored into what neighborhood they ultimately chose.”
Lautz added that older boomers and those in the silent generation were similarly heavily influenced by a desire to be close to family and friends. Forty-seven percent of both generations cited this as a factor in neighborhood selection.
Older boomers (35%) and the silent generation (36%) also valued their neighborhood being close to areas in which they could shop, and both groups (28% and 31%, respectively) stated that proximity or convenience to a health care facility was an influential factor in choosing a neighborhood.
Among all sellers, the most commonly cited reason for wanting to sell their residence was a desire to move closer to friends and family (15%), followed by the home being too small (14%) and a change in family situation (12%).
In the midst of the pandemic, the usefulness of virtual tours skyrocketed, especially among 22- to 40-year-old buyers, the NAR report stated.
“Homebuying aside, this segment of the population was already accustomed to doing research online,” said Lautz. “So, to see them really embrace virtual tours and virtual open houses was a given, nonetheless, real estate agents are the top information source, and the data shows these buyers ultimately used agents to purchase a home.”
Out of all buyers, 88% cited a real estate agent as an information source they used during their home search, but that share rises to 91% among younger millennial buyers ages 22 to 30. Two percent of all buyers and sellers were from Generation Z.
“Buyers used all tools available to them—whether it be a mobile device, yard sign or an online video—but at some point, nearly all buyers turned to an experienced agent to assist with the transaction,” said Lautz. “This is especially true among younger millennial consumers as they are likely first-time buyers and need help navigating the market and all steps involved in the process.”
Buyers from all generations—more than half (51%)—primarily wanted their agent’s help to find the right home to buy. Homebuyers also called on agents to help with brokering the terms of their sale and to aid with price negotiations. According to the NAR report, the oldest and youngest age groups, those 66 and older, as well as those ages 22 to 30, were more likely to want their agent’s assistance with paperwork.
In terms of selling and consistent across all age groups, nine in 10 home sellers worked with an agent to sell their home.
“Realtors continue to be an integral part of both the homebuying and the home selling process,” said NAR President Charlie Oppler, a Realtor from Franklin Lakes, NJ, and the CEO of Prominent Properties Sotheby’s International Realty. “Buyers and sellers should understand that we can assist with every part of the real estate transaction, from finding or listing a property, securing a loan and sorting through the exhaustive paperwork.”
The largest share of all home sellers were baby boomers, at 43%. Sellers aged 55 and younger often upgraded to a larger and more expensive home while staying relatively close to their prior home. Sellers 56-years and older regularly purchased a similarly-sized home, but less expensive than the home they sold by moving farther.
Overall, sellers stayed in their previous home for a median of 10 years before selling, with a median of six years among sellers ages 31 to 40, and a median of 16 years among sellers 66 and older. Recently sold homes were generally on the market for a median of three weeks.
Lautz explained that homes moved off the market quickly because of the ongoing home inventory shortage. The limited supply of houses for sale also contributed to sellers being able to recoup so much on their transactions, according to Lautz. Sellers made a median of $66,000 in equity from their sale.
NAR mailed a 131-question survey in July 2020 using a random sample weighted to be representative of sales on a geographic basis to 132,550 recent homebuyers. Respondents had the option to complete the survey via hard copy or online; the online survey was available in English and Spanish. A total of 8,212 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 6.2%. The sample at the 95% confidence level has a confidence interval of plus-or-minus 1.08%.
The recent homebuyers had to have purchased a primary residence home between July 2019 and June 2020. All information is characteristic of the 12-month period ending July 2020 with the exception of income data, which are for 2019.