The 2017 home buying season will be characterized by a large increase in first time home buyers, increasing affordability issues among buyers, and high demand for suburban homes, according to realtor.com®’s Active Home Shopper Report released today.
The study, based on September survey data of active shoppers on realtor.com®, provides insight into future home buying trends in 2017 by analyzing responses from consumers who plan to purchase homes in the Spring or Summer of 2017, peak seasons for home purchases.
Significant findings from the survey include a potentially large increase in first-time home buyers in 2017, capable of rising to 52 percent of all buyers next year, from 33 percent in 2016. Affordability, down payments, and credit scores are starting to challenge limited inventory as the No. 1 barrier to home ownership. Suburban homes are the most preferred as 43 percent of first time home buyers have a stated preference for the suburbs, likely due to their desire for safe neighborhoods, privacy and to meet the needs of their growing families.
- First time home buyers could make up over half of the 2017 home buyer population
The most notable characteristic of the 2017 home buying season is expected to be the large number of first time home buyers entering the market. According to the survey, first-time home buyers now make up 52 percent of prospective buyers looking to purchase in 2017. Last year, 33 percent of shoppers planning to purchase in 2016 were first timers. Millennials are leading the pack with 61 percent of these first-time home buyers under age 35. Top reasons cited by millennials for buying include getting married or moving in with a partner, growing tired of their current living space, and planning to increase family size.
“This represents an ‘oh shift’ moment in housing,” said Jonathan Smoke, chief economist for realtor.com®. “With so many first-time buyers in the market, competition will be even fiercer next year for affordable starter homes in the suburbs. Those looking to buy may want to consider a winter home purchase in order to avoid bidding wars and higher prices spurred by a potential increase in millennial buyers.”
- Affordability and mortgage qualification expected to replace lack of inventory as the largest barrier to home ownership
In 2016, 40 percent of home shoppers cited lack of inventory as the largest barrier to homeownership, but realtor.com® reports this will potentially shift to affordability and mortgage qualification issues as more first time home buyers enter the market. Of first time home buyers planning to purchase next spring surveyed in September, 37 percent indicated their largest impediment to home ownership is the down payment and 30 percent cited finding a house within their budget.
- Safe neighborhoods, more living space, and larger yards top list of key home attributes
First-time home buyers cite safety, more living space, and larger yards as the key features for their new homes. This is consistent with their top goals of buying: attaining privacy and addressing the needs of their families. A third top objective of first-time buyers is to make a financial investment that will grow over time.
As millennials marry and move in with partners, reasons to purchase are driven by actual or planned growth in their families, and they show strong preference for single family homes (39 percent) or townhomes (32 percent) and away from multifamily homes (15 percent), condos (10 percent), or mobile homes (2 percent).
- Competition for the suburbs is expected to heat up
With families and safety on the brain, it’s no surprise that first-time home buyers identified the suburbs as their No. 1 preferred location. In fact, 50 percent of all respondents identified suburban areas as their preferred location. For boomers, their desire for the suburbs can likely be attributed to their desire to be close to family and friends.
Data also show younger home buyers are more likely than their older counterparts to prefer urban living, the second-most common location preference among millennials after suburbs.
- Spring and summer will continue to be the hottest times to buy a house in 2017
A majority of all survey respondents were beginning the housing search at the time of the survey and planned to purchase in seven months or longer, indicating spring and summer will continue as the top seasons to buy and sell homes. Realtor.com® found that 73 percent of respondents had been considering homeownership for less than three months and did not expect to purchase a home immediately.
For more information, visit realtor.com®.