While plenty of home buying myths – like the need for a 20 percent down payment – persist, it’s clear that today’s buyers are blazing their own paths to the closing table. Below, we share four surprising trends identified by the National Association of REALTORS® (NAR) in their 2015 Profile of Buyers and Sellers.
1. Veterans are buying homes in droves
In one of the more interesting stats from NAR’s profile, 18 percent of 2015 homebuyers were military veterans. Stats experts report that only 7.3 percent of American citizens have served in the military at some point in their lives, so it’s clear that veterans are buying homes at a much higher rate than the general population.
There are a few reasons for this. First, veterans tend to be older – the median age of veterans is 65 – and the older you are, the most likely you are to own a home. It’s also likely that aging veterans are downsizing and moving into homes that will better suit them after retirement.
Additionally, veterans are eligible for Veterans Administration (VA) loans, which allow them to purchase a home without a down payment, and other programs that help with financial burdens like closing costs. It’s estimated that 10 percent of veterans have VA-backed loans on their home, which would help to increase their homeownership rate.
2. Buyers are moving across the highway – but not much farther
If you’ve thought about moving to your dream house just two suburbs away, you’re not alone. The NAR shows that repeat buyers in the Midwest move only 10 miles between purchased homes on average. And this isn’t a case of the Midwest operating differently than the rest of the country; nationwide, buyers tend to move within 14 miles of their previous residence.
Why the short-distance moves? Frankly, they match the small reasons that cause people to select a certain home. Across the country and in our local market, these are the top three reasons buyers cite for choosing their new residence, according to the NAR:
- Quality of the neighborhood (59% )
- Convenience to job (44%)
- Overall home affordability (38%)
When you think of our metro area, it’s easy to imagine a buyer moving from Richfield to Wayzata if they work in the western suburbs or from Savage to Chaska if they desire a more walkable community.
3. First-time homebuyers are six times more likely to be non-white
The NAR reports that 94 percent of last year’s repeat buyers were Caucasian, but this number does not carry into the first-time buyer demographic. Among first-time buyers, 25 percent identified themselves as non-white, showing that as our country becomes more diverse, so too do the players in the housing market.
This is welcome news for our local market. Reports this fall showed that black Minnesotans faced a staggering income gap, and we discussed how that could impact their ability to buy a home. We’ll be eager to see if Minnesota is able to hold its ranking as the market with the highest rate of homeownership, and if our local market reports gains in homeownership across every demographic.
4. Half of first-time buyers take less than a year to save for a down payment
Perhaps the most interesting stats coming out of the NAR’s report are related to first-time buyers navigating through the down payment process. The NAR reports that last year 51 percent of first-time buyers took less than one year to save for a down payment, and 33 percent said it took them less than six months.
A few things can explain this trend. On average, first-time buyers in 2015 financed 94 percent of their purchase with a mortgage – this means that on average, this group only put 6 percent down at closing. It’s clear by these numbers that first-time buyers are taking advantage of new loan options that allow them to put as little as 3 percent down.
Some first-time buyers are also taking advantage of gift funds, which allows them to finance less of the purchase without having to save over a longer period of time; 27 percent of first-time buyers reported that they took advantage of gift funds from a family member or friend to help with their down payment.
The market is changing – and so are the buyers
It’s clear that as the market changes, so do the homebuyers entering it. If you’ve been thinking that you aren’t a good fit to buy a home in 2016, you may be missing out on a great opportunity. Our local experts can help you examine your finances, location desires and more to see if now is a good time for you to buy. Reach out today to get started.
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