The overall strengthening pace of home sales over the past year was driven more by repeat buyers with dual incomes, according to the annual survey released by the National Association of Realtors.
The survey also found that nearly 90% of all respondents worked with a real estate agent to buy or sell a home which pushed for sale by owner transactions to their lowest share ever.
The number of first time buyers was down to 32% from 33% a year ago, which is the second lowest share since the survey began in 1981 and the lowest since 1987 when it was 30%. Historically, the long term average shows that nearly 40% of primary purchases are from first time buyers.
According to Lawrence Yun, NAR chief economist, the housing recovery's missing link continues to be the absence of first time buyers. ‘There are several reasons why there should be more first–time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college educated, and the fact that renting is becoming more unaffordable in many areas,’ he said.
‘Unfortunately, there are just as many high hurdles slowing first time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there's scarce inventory for new and existing homes in their price range, and it's still too difficult for some to get a mortgage,’ he explained.
Yun pointed out that this year's survey perhaps offers additional clues to why fewer first time buyers are reaching the market. ‘First time buyers reported that debt in all forms delayed saving for a down payment for a median of three years, and among the 25% who said saving was the most difficult task, 58% said student loans delayed saving,’ he said.
‘With a median amount of student loan debt for all buyers at $25,000, it's likely some younger households with even higher levels of debt can't save for an adequate down payment or have decided to delay buying until their debt is at more comfortable levels,’ he added.
With strong price growth in many markets and fewer first time buyers, the results in this year's survey reveal a market with a higher share of married couples at 67% percent, up from 65% last year, who have higher household income than previous years.
Married repeat buyers have the highest income among all buyers at $108,600, while the share of single female buyers decreased from 16% to 15% and male buyers remained flat at 9%.
‘Similar to some of the obstacles facing first time buyers, tighter credit conditions and having less purchasing power than households with dual incomes likely led to the share of single female buyers declining to its lowest since 2001 when it was also 15%,’ Yun pointed out.
The median age of first time buyers was 31, unchanged for the last three years, and the median income was $69,400 compared to $68,300 in 2014. The typical first time buyer purchased a 1,620 square foot home costing $170,000, while the typical repeat buyer was 53 years old and earned $98,700. Repeat buyers purchased a median 2,020 square foot home costing $246,400.
When asked about the primary reason for purchasing, more first time buyers in this year's survey at 64% cited a desire to own their own home as the primary reason compared to a year ago when it was 53%. For repeat buyers, desire to own a home of their own and wanting to own a larger home were both the top reason given each at 13%.
Nearly half of all buyers, 46%, said the timing was just right and they were ready to purchase a home and according to the survey, buyers continue to view buying a home as a good financial investment. Some 80% said it was a good investment and 43% believe it's better than stocks.
Looking ahead, first time buyers plan to stay in their home for 10 years and repeat buyers plan to hold their property for 15 years.
An overwhelming majority of recent buyers, 86% versus 88% in 2014, still financed their purchase, despite above normal activity from all–cash buyers likely pushing the percent share down. Younger buyers were more likely to finance, and the median down payment ranged from 6% for first time buyers to 14% for repeat buyers.
Some 45% of first time buyers in this year's survey said the mortgage application and approval process was much more or somewhat more difficult than expected, 91% of all buyers chose a fixed rate mortgage, with 23% financing their purchase with a low down payment Federal Housing Administration backed mortgage, down from 43% five years ago.
‘With first time buyers stuck on the sidelines, the majority of sales activity in most parts of the country is coming from pent–up sellers taking advantage of rising home values in their neighbourhoods and using their equity to trade up or move down,’ added Yun.
While more home buyers used the internet as the first step of their search than any other option at 42%, real estate agents remain an integral part of the home search process and 88% of buyers who searched for homes online ended up purchasing through an agent.
Buyers between the ages of 18 to 24 were the most likely to use an agent at 90% some 85% of buyers in each of the other age categories also used an agent during their home search.
‘With tight inventory conditions leading to stiff competition in several parts of the country and what's found online sometimes not entirely accurate, buyers are turning to agents for expert advice and assistance in navigating today's fast moving housing market,’ said NAR President Chris Polychron.
In recent years, the home search resource that's gaining the most popularity is mobile or tablet applications, steadily increasing from 45% in 2013 to 61% in this year's survey. Other noteworthy results included yard signs at 51% and open houses at 48%.
With tight inventory conditions prevalent in many markets, buyers moved faster than in previous years to find the house they purchased, typically taking 10 weeks for the second consecutive year. From 2009 to 2013, the typical home search process took 12 weeks.
A detached single family home continues to be the most common type of home bought by 83% while purchases of townhouses or row houses remained unchanged from a year ago at 7%. Some 89% of buyers with children under the age of 18 purchased a detached single family home compared to 80% of buyers with no children in their home. Overall, the typical home purchased during the survey period was built in 1991 and had three bedrooms and two bathrooms.
