Pur­chas­ing a home of their own

A sur­pris­ingly high num­ber of first-timers now buy­ing houses

Daily Local News (West Chester, PA) - - BUSINESS - By Josh Boak AP Eco­nomics Writer

WASH­ING­TON >> For years, the U.S. hous­ing mar­ket looked bleak for young cou­ples hop­ing to buy their first homes but strug­gling with high stu­dent debt, low pay and mea­ger down­pay­ment sav­ings.

But a new sur­vey by the real es­tate firm Zil­low sug­gests that first-time buy­ers may be en­ter­ing the mar­ket in greater num­bers than in­dus­try watch­ers had as­sumed.

Over the past year, the sur­vey found, nearly half of home sales have gone to first-timers. That’s a much higher pro­por­tion than some other in­dus­try es­ti­mates had in­di­cated. And it comes as a sur­prise in part be­cause own­er­ship rates for adults un­der 34 are at their low­est lev­els since the gov­ern­ment be­gan track­ing the fig­ure in 1994.

Zil­low’s sur­vey re­sults sug­gest that the trend is shift­ing, and that some of this year’s growth in home sales has come from a wave of col­lege-ed­u­cated cou­ples in their 30s, who are the most com­mon first-time buy­ers.

They are peo­ple like Natasja Handy, a 32-year-old lawyer and new mother. She and her hus­band, a doc­tor, are about to close on their first home in the North­east sec­tion of Wash­ing­ton, D.C. — a row house with about 1,900 square feet that cost $720,000.

The cou­ple worked with bro­kers at Redfin and made a 5 per­cent down pay­ment af­ter hav­ing lost two bids on other homes.

“We waited a very long time to pur­chase our first house,” Handy said. “We’ve al­ways felt like we were giv­ing some­one else our money, in­stead of putting it into some­thing we own.”

In sub­ur­ban Min­neapo­lis, few first-time buy­ers have enough sav­ings for a down pay­ment, and many rely on gifts or loans from rel­a­tives, said Mar­cus Jo­hannes, an agent with Ed­ina Re­alty.

“Most of my peo­ple, they get funds from fam­ily,” he said. “They get cre­ative tap­ping 401(k)s.”

If the pat­tern in Zil­low’s sur­vey holds, it could raise hopes

that to­day’s vast gen­er­a­tion of 18-to-34-year-old millennials will help sup­port the hous­ing mar­ket as more of them move into their 30s.

The 168-page re­port that Seat­tle-based Zil­low re­leased Tues­day also found that home own­er­ship is in­creas­ingly the do­main of the col­lege-ed­u­cated. And it re­ported that older Amer­i­cans who are look­ing to down­size are pay­ing pre­mi­ums for smaller houses.

Here’s a break­down of Zil­low’s key find­ings:

• Forty-seven per­cent of pur­chases in the past year went to first-time buy­ers. Their me­dian age was 33. By con­trast, sur­veys from the Na­tional As­so­ci­a­tion of Real­tors have in­di­cated that first-timers ac­count for only about 32 per­cent of buy­ers.

The dif­fer­ence be­tween the two sur­veys may stem from their method­olo­gies. The NAR has used a mail-based sur­vey for its an­nual fig­ures. Zil­low used an on­line sur­vey that might have gen­er­ated a greater response rate from younger buy­ers.

Zil­low’s find­ings might help ex­plain a per­sis­tent short­age of homes for sale: Un­like move-up buy­ers, first-time pur­chasers don’t have a home to list for sale, thereby de­priv­ing the mar­ket of sup­ply.

Adam DeSanc­tis, an NAR spokesman, noted that his

or­ga­ni­za­tion’s own sur­vey, due out later this month, will show a ris­ing share of first-time buy­ers, though it will re­main be­low the his­tor­i­cal av­er­age of 39 per­cent that’s pre­vailed since the or­ga­ni­za­tion be­gan track­ing this fig­ure in 1982.

DeSanc­tis noted that gov­ern­ment fig­ures show home own­er­ship among young adults re­main at its low­est level in his­tory, which is why his or­ga­ni­za­tion is skep­ti­cal that nearly half of sales go to first-time buy­ers.

• No col­lege? Dwin­dling chance of home­own­er­ship

It’s be­come harder to re­al­ize the dream of home own­er­ship with­out a col­lege de­gree. Sixty-two per­cent of buy­ers have at least a four-year col­lege de­gree. Cen­sus fig­ures show that

just 33 per­cent of the U.S. adults grad­u­ated from col­lege. The gap be­tween the ed­u­ca­tion lev­els of home­buy­ers and the broader U.S. pop­u­la­tion in­di­cates that work­ers with only a high school de­gree are be­com­ing less likely to own a home. In 1986, just 12 per­cent of home­own­ers were col­lege grad­u­ates, ac­cord­ing to gov­ern­ment fig­ures.

• Mil­len­nial home buy­ers are in­creas­ingly His­panic

Out of the 74 mil­lion U.S. house­holds that own their homes, a siz­able ma­jor­ity — 77 per­cent — are white. But these de­mo­graph­ics are chang­ing fast. Only 66 per­cent of mil­len­nial home­own­ers are white. The big gains have come from Lati­nos, who make up 17 per­cent of mil­len­nial home­own­ers

but just 9 per­cent of all home­own­ers.

Asians also make up a greater share of millennials. This means that as to­day’s mil­len­nial gen­er­a­tion ages, the hous­ing mar­ket may look con­sid­er­ably more di­verse than it does now.

• Older Amer­i­cans aren’t just down­siz­ing; they’re also up­grad­ing.

The so-called “silent gen­er­a­tion” — those ages 65 to 75— bought homes in the past year with a me­dian size of just 1,800 square feet, about 220 square feet smaller than the homes they sold. But that smaller new home still cost more. These re­tire­ment-age buy­ers paid a me­dian of $250,000, nearly $30,000 more than the home they sold. In some cases, the higher pur­chase

price likely re­flects the prof­its from the sale of their pre­vi­ous home, in other cases a de­sire by upscale buy­ers for lux­ury fin­ishes and ameni­ties.

• Starter homes are no longer pop­u­lar.

When millennials buy, they’re leapfrog­ging past the tra­di­tional, smaller starter home. This younger gen­er­a­tion paid a me­dian of $217,000 for a 1,800-square­foot house. That me­dian is nearly iden­ti­cal to what older gen­er­a­tions buy.

Across the United States, the typ­i­cal home costs $222,000, has three bed­rooms, 2½ baths and 1,900 square feet. For some­one with chil­dren at home, that fig­ure swells to 2,000 square feet and a me­dian price of $234,000.

THE AS­SO­CI­ATED PRESS

First-time buy­ers may be en­ter­ing the U.S. home mar­ket in greater num­bers than in­dus­try watch­ers had as­sumed. Nearly half of sales in the past year went to peo­ple who were buy­ing their first home, ac­cord­ing to a sur­vey re­leased Tues­day by the real es­tate firm Zil­low. That’s a much higher pro­por­tion of the mar­ket than other in­dus­try es­ti­mates had in­di­cated.

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