Despite strong interest in buying a home, low inventory, rising interest rates and increasing home prices are holding back potential homebuyers, according to the National Association of Realtors 2018 Profile of Home Buyers and Sellers. The survey of home buyers who purchased a home between July 2017 and June 2018 found single female buyers continue to be a powerful force in the market, accounting for 18 percent of all buyers.
The annual buyer and seller profile found the share of first-time home buyers continued a three-year decline, falling 33 percent (34 percent last year). This number has not been 40 percent or higher since the first-time home buyers credit ended in 2010.
"Low inventory, rising interest rates and student loan debt are all factors contributing to the suppression of first-time home buyers," said NAR chief economist Lawrence Yun.
Yun explained with the lower end of the housing market seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford. "Homes selling in a median of three weeks and multiple offers were a common occurrence, further pushing up home prices. These factors contributed to the low number of first-time buyers and the struggles of would-be buyers dreaming of joining the ranks of homeownership," said Yun.
For the second year in a row, the single female buyer group was the second most common household buyer type behind married couples (63 percent). Single male buyers came in third (9 percent). However, single males tended to purchase more expensive homes, at a median price of $215,000, compared to single females with a median price of $189,000, the lowest of all household buyer types.
Among the 13 percent of buyers who said saving for a down payment was the most difficult part of the buying process, 50 percent reported student loan debt had inhibited their ability to save for a home purchase or down payment. Twenty-four percent of all buyers indicated they have student loan debt at a median of $28,000, and 40 percent of first-time buyers indicated they have student loan debt at a median of $30,000.
Overall, buyers paid a median 13 percent down payment, up from 10 percent last year and the highest since 2005. First-time buyers paid a median 7 percent down payment, up from 5 percent last year, while repeat buyers paid a median 16 percent, up from last year's 14 percent.
For the third straight year, the median age of first-time home buyers was 32 years old. Their median income was the same as last year's at $75,000, and they spent a median of $203,700 on a home. These buyers were more likely to purchase smaller homes than repeat buyers, with a median size of 1600 square feet.
Ninety-five percent of buyers used the internet at some point during their home search process. Eighty-six percent of buyers used a real estate agent in their home search. Repeat buyers were more likely to use an agent than first-timers (87 percent to 86).
Overall, 87 percent of buyers ended up purchasing their home through a real estate agent (the same as 2017). Finding the right home and negotiating terms of sale were the top factors buyers desired from their agent.
"A Realtor has the experience and knowledge about the local market and neighborhood and this expertise is valuable when searching for a home in a competitive market with low inventory," said Bill Moody, president of the Silicon Valley Association of Realtors.
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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