The share of first-time buyers fell for the third consecutive year and remained at its lowest point in nearly three decades, according to the 2015 Profile of Home Buyers and Sellers, an annual survey released this month by the National Association of REALTORS® (NAR). The survey reveals the strong pace of home sales over the past year was driven more by repeat buyers with dual incomes and higher salaries.
According to findings from this year's survey, the share of first-time buyers declined to 32 percent from 33 percent a year ago, the lowest since 1987 when first-time buyers made up 30 percent of the market. Historically, the long-term average share of first-time home buyers is nearly 40 percent.
NAR chief economist Lawrence Yun says the housing recovery's missing link continues to be the absence of first-time buyers. "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," said Yun.
The biggest hurdle for first-time home buyers is coming up with the down payment, with student debt being the main culprit. The median amount of student loan debt for buyers is $25,000.
This year's surveys reveals 67 percent of home purchases (up from 65 percent) were made by married couples with a higher household income than previous years. The share of single female buyers dropped to 15 percent from 16 percent last year. Like last year, 13 percent of buyers were multi-generational households, including adult children, parents and/or grandparents.
The median age of first-time buyers was 31, unchanged for the last three years, and the median income was $69,400. The typical repeat buyer was 53 years old and earned $98,700.
Sixty-four percent of buyers said their primary reason for purchasing was the desire to own their own home, compared to 53 percent a year ago. Wanting to own a larger home was an additional reason cited by repeat buyers.
Buyers continue to view buying a home as a good financial investment, up 80 percent from 79 percent last year and 43 percent find it better than stocks. First-time buyers plan to stay in their home for 10 years and repeat buyers plan to hold their property for 15 years.
Majority of recent buyers (86 percent versus 88 percent in 2014) still financed their purchase. The median down payment ranged from 6 percent for first-time buyers to 14 percent for repeat buyers.
Proceeds from the sale of their primary residence was the top down payment source for 53 percent of repeat buyers, up from 47 percent last year and 40 percent in 2012. "Rising home values have contributed to the push by repeat buyers who used the equity from their homes," said Chris Isaacson, president of the Silicon Valley Association of REALTORS®. "There are likely more that want to do so, but in our region it's hard for some to do because they have no place to go because there are few homes for sale."
While 42 percent of home buyers used the Internet as the first step of their home search, 88 percent of buyers who searched for homes online ended up purchasing through an agent.
"Buying a home is one of the biggest financial transactions most buyers will make. Now, more than ever, due to the very low inventory and tight competition for homes, buyers are turning to Realtors not only for their expert advice, but for their sharp negotiating skills in the hope of purchasing a home in today's fast-paced market environment," said Isaacson.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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