First-time millennial homebuyers are poised to revolutionize the 2017 real estate market
You want a real estate revolution? We’ve got you covered: next year, more than half of all homes will be bought by first-time home buyers, according to 2017 real estate market predictions by realtor.com. It’s a seismic shift from 2016. And here’s the kicker: most of those newbies will be millennials.
Get ready for a new look, housing market.
Each year, 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. And what was found in their latest Active Home Shopper Report is a true sea of change in the buying population that will affect which homes and neighborhoods are the most desirable in 2017.
According to the report, the percentage of first-time homebuyers could rise to as high as 52 percent of all buyers, an increase from 33 percent in 2016.
But this boost in first-time buyers will also make affordability, downpayments, and credit scores a challenge, and those issues could become the market’s top problem next year. Currently, the limited inventory of listings is the top barrier to homeownership.
In general, suburban homes are preferred by 43 percent of first-time homebuyers surveyed, likely due to their desire for safe neighborhoods, privacy, and the needs of growing families, according to realtor.com researchers.
Here are the top 5 predictions for the 2017 real estate market:
1. First-time homebuyers could make up a majority of 2017 homebuyers
According to the survey, first time homebuyers make up 52 percent of prospective buyers looking to purchase in 2017. Millennials lead the pack with 61 percent of potential first-time buyers under age 35. Top reasons cited by millennials for buying: 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,” says 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.”
2. Affordability and mortgage qualifying expected to replace lack of inventory as largest barrier to homeownership
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 buyers planning to purchase next spring, 37 percent said their largest impediment to homeownership is the downpayment, and 30 percent said finding a house within their budget.
3. Safe neighborhoods, more living space, and larger yards top list of key home attributes
Safety, more living space, and larger yards as key features 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 preferences for single-family homes (39 percent) or townhomes (34 percent), and away from multi-family homes (15 percent), condos (10 percent), or mobile homes (2 percent).
4. Competition for the suburbs should heat up
With families and safety on the brain, it’s no surprise that first time homebuyers 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 shows younger homebuyers are more likely than their older counterparts to prefer urban living, the second-most common location preference among millennials after suburbs.
5. Spring and summer will continue to be 2017’s hottest time to buy a house
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: 73 percent of respondents had been considering home-ownership for less than three months and did not expect to purchase a home immediately.
Sources: “Realtor.com: First look at 2017 real estate market,” Florida Realtors; “First-Time Millennial Buyers Poised to Revolutionize the Real Estate Market in 2017,” realtor.com