The current housing market is the hottest it has been since before the Great Recession. According to the National Association of Realtors® 2021 Home Buyers and Sellers Generational Trends Report, sellers made a median of $66,000 on the sale of their homes this year. This is a $6,000 increase from the same time in 2020. Sellers are reaping the benefits and the majority of sellers today are baby boomers.
“In a real estate market that is tipped in the favor of sellers, boomers and older homeowners are really the ones holding the cards,” says realtor.com® Chief Economist Danielle Hale. Those who are selling homes can use the profits to help them buy new ones, she adds, pointing out that they’re “generally better equipped to deal with market conditions.”
Record low mortgage rates and lack of home inventory have buyers in a big competition. This buyer frenzy means homes are selling quickly and for high prices. Today sellers are getting roughly 99% of their original asking price for their home. Some sellers are even seeing bidding wars, getting a higher price than the original asking price. Current inventory is lasting only 3 weeks before they are sold.
When looking at sellers by generation, baby boomers make up 43% of those currently selling a home. Baby boomers are in a stage of life where they want to downsize. The pandemic has also shifted many baby boomers to want to move closer to family members in the same sized home.
Millennials make up the largest share of buyers at 37%. Out of the 37%, 31% of those buyers were first-time homebuyers. This market is a difficult market to navigate for first-time homebuyers.”Millennials have a lot of headwinds entering the real estate market,” says Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “There’s not enough homes to go around for the buyers who want to be able to purchase.”
Another surprising fact is that younger buyers are more likely to pay over the asking price in this competitive market. “In a market where competitive bids are the norm in many areas, it’s interesting to note that younger buyers are more likely to pay over asking [price],” says Hale. “They’ve got longer working careers, so they [may be] more willing to take risks.”
Of those homes that are in most demand, detached, single-family homes made up 81% of the sales so far this year. Buyers want a detached home with a backyard and a garage. Families want their own space and more space to accommodate home offices and remote schooling. Existing home sales are in more demand due to cheaper pricing and more in inventory. Only 15% of homes sold so far this year are new construction.
Generation X made up 18% of buyers that purchased multigenerational homes. This generation has aging parents that might need assistance. “They’re purchasing multi-generational homes [to] take care of aging relatives and keep them out of nursing rooms or for caregiving of young children who may not be able to go to daycare or child care because of the pandemic,” says Lautz. “The other big reason is pooling incomes to be able to buy a larger home.”
The study indicated that today’s typical buyer has a median income of $96,500 in 2019 with 65% married. 18% single women, 9% single men and 9% unmarried couples. “Single women remain a large buying force,” Lautz said in a statement. “A number of divorced women and those who were recently widowed purchased a home without the help of a spouse or roommate.”
Eighty-seven percent of buyers financed their homes while young buyers were the most likely to put all of their savings toward a down payment. Older buyers, such as baby boomers, purchased homes using money earned off a home sale.