Hi! Welcome back to #WorldWednesday. It's a blistering hot housing market. With that in mind, it's good to know the fundamentals of the current market and trends and what we forecast for the remainder of the year.
According to the National Association of Realtors, NAR, in 2021, 15% of the homes purchased were new homes. The purchase of previously owned homes made up 85% of overall sales. 82% of all homes sold were detached single-family homes. The typical home purchased was approximately 1900 square feet, had 3 bedrooms and two bathrooms and was built in 1993. Most recent buyers were looking to avoid renovations and problems with plumbing and electricity. Heating and cooling costs and windows/doors/siding were the most important environmental features for home buyers. Over 32% consider commuting costs highly important.
Millennials have made up the biggest percentage of homebuyers since 2014. About 81% of younger millennials, aged 25 to 31, and 48% of older millennials were first-time buyers. Baby boomers, many seeking their forever homes, purchased the second most properties, often competing with millennials for smaller, more affordable properties. Younger boomers, aged 57 to 66, made up about 17% of buyers, while older boomers, aged 67 to 75, bought about 12% of homes. They were followed by Generation X, aged 42 to 56, who made up 22% of recent buyers. These buyers were often looking for larger, trade-up homes. The silent generation, aged 76 to 96, purchased 4% of homes, while members of Gen Z, aged 18 to 22, represented just 2% of homebuyers.
Even in the face of such a daunting struggle—finding a home that met their needs, coming up with the money to afford it, and prevailing in a bidding war—buyers weren’t dissuaded.The top reasons to purchase a home—even in this crazy market—were that they wanted to own a property of their own; they wanted larger residences; they wanted to be closer to family and friends; there was a change in their family circumstances, such as a marriage, divorce, or birth of a child; or they sought a property in a better location. However, nearly three-quarters of buyers were forced to compromise on what they wanted in a home. About 27% of all buyers compromised on price, while 21% settled on the home’s condition. Buyers also made trade-offs on the size of their residences and their yards along with the distance from their family, friends, and jobs.
As we headed into the year, Zillow predicted the 12 month rate of home price growth would decelerate to 11% by the end of 2022. However, Zillow has since revised their report and now estimates the year-over-year rate to peak at 21.6% in May and end the year at 17.3%.
Many experts expect that in the long term, rising mortgage rates could slow down the housing market. After all, each uptick in mortgage rates prices out some buyers from the market. But the short-term impact is the opposite: worried that rates will continue to shoot up, more homebuyers plunge into the market. Rates have increased, but they're still lower than the historic norm. So it has increased buyer urgency.
The bottom line is that the economy does impact the value of real estate and home shoppers hoping for a surge of new inventory and relief from heightened competition have so far been left disappointed. “It remains to be seen how long buyers can weather this storm, especially in the face of rising mortgage rates, and how long homeowners will watch values rise before deciding to list. Neither have blinked yet,” says Zillow economist, Nicole Bachaud.
During these turbulent times, we at Shaffer Realty and Real Estate are here for you. Contact us today to schedule a complimentary market analysis. See you soon! Warmly, Susan