The coronavirus pandemic initiated several shifts in America’s housing market over the past eight months. Changes in the behaviors of home buyers and sellers were especially notable as buyers’ usual tendencies altered, and the urgency to sell accelerated.
This is according to new data from the National Association of Realtors®’ 2020 Profile of Home Buyers and Sellers,1 a yearly report which discusses demographics, preferences and experiences of buyers and sellers across America.
Those who completed their transaction after March were more likely to purchase a multi-generational home. Multigenerational home purchases accounted for 15% of sales after March, compared to 11% for those who closed before April. In light of stay-at-home orders, instituted within the early weeks of the pandemic, 14% of buyers who bought after March said their transaction was delayed because of COVID-19.
“The coronavirus without a doubt led home buyers to reassess their housing situations and even reconsider home sizes and destinations,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR.
“Buyers sought housing with more rooms, more square footage and more yard space, as they may have desired a home office or home gym,” she added. “They also shopped for larger homes because extra space would allow households to better accommodate older adult relatives or young adults that are now living within the residence.”
Among other updated statistics, this year’s report includes two new sections on active home buyers and sellers during the COVID-19 pandemic. Purchases and sales that closed in April 2020 or after are considered transactions that occurred during the pandemic. The survey evaluated buyers’ and sellers’ behaviors prior to the virus taking shape and then assessed consumer and seller patterns in the midst of the outbreak.
Buyers who purchased after March were more likely to relocate to the suburbs and were more likely to pay more for that home – regardless of its location – paying an average of $339,400 compared to $270,000 for those who purchased before April. Findings show those who bought a home during the pandemic are expected to remain there for 10 years. That is compared to 15 years for those who purchased prior to the COVID-19 outbreak.
Five percent of buyers who purchased after March did so without physically seeing the home in-person, compared to 3% of buyers who purchased before April. Those who went to closing after March were less likely to be denied by a lender – 2% compared to 5% for pre-April buyers. This group also had higher household incomes – $100,800 compared to $94,400 for pre-April buyers.
Lautz notes several additional, significant behavioral changes among home sellers due to the pandemic, including a desire from many to accelerate their transactions.
“So many sellers were eager to get out of their old home and move to something bigger that would better meet their needs during quarantine,” she said.
The NAR report reveals that owners who sold in 2020 were more likely to say that their need to sell was “at least somewhat urgent.” Those who closed in April or later were more likely to sell because their home was too small – 18% compared to 13% of those before April.
Sellers after March were more likely to use incentives to help sell their home, and they sold for 98% of the list price compared to 99% for those before April. However, those homes sold after March ultimately had higher selling prices – $300,000 compared to $270,700 for those that sold before April.
Fifty-six percent of homeowners who sold after March sold in the suburbs, compared to 48% who sold before April.
Other Shifts in Buyer and Seller Behaviors
The average buyer age of 55 was an all-time high, according to the NAR survey. The average first-time buyer was 33 years old.
There was a slight rebound in single women buyers – 18% from 17% in 2019. A record-low 33% share of buyers with kids at home under the age of 18 was recorded – a drop from 58% in 1985.
The proportion of first-time buyers dropped to 31%, down from 33% in 2019. This is the lowest share since 1987’s recording of 30%. Twenty-two percent of first-time buyers moved from a family member’s home directly into ownership. This is also a lower share than last year’s.
The NAR study found that 97% of buyers searched for their home online. This is the highest percentage for an online home search and is a jump from last year’s 93%. The time spent looking for a home declined to eight weeks from 10, which is the shortest search since 2007.
“Some buyers purchased their homes before ever physically seeing them in person,” said Lautz. “They researched, viewed photos online and did virtual tours from their computers and phones, and ultimately made an offer through their agent.”
On average, buyers looked at nine homes in person, and an additional five homes via virtual tour listing online only. Fifty-three percent of buyers said finding the right property was the hardest step in the home buying process.
Agents
Eighty-eight percent of buyers reported using an agent to purchase their home. This is near a historical high. More than half of buyers found their agent through a referral, or stated that they had used the agent in the past. Ninety-one percent of buyers said they would “definitely” or “probably” use the same agent in the future.
“Realtors® did their part in not only keeping afloat America’s real estate industry, but also in helping sustain our nation’s economy as it faced unprecedented and unexpected challenges throughout the past year,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, Calif. “We are all in unknown territory with this pandemic, so it’s no surprise that more buyers than ever turned to agents to help them navigate through some of the uncertainties and one of the most complex, competitive markets any of us have ever seen.”
Among home sellers, 89% turned to an agent to help with their sale. For-Sale-By-Owner transactions were at 8%, near historic lows.
For the first time, the home buyer and seller survey examined iBuyer usage, finding that less than 1% sold their property via an iBuyer. Eighty-eight percent of all sellers reported using a seller’s agent who provided a broad range of services and managed most aspects of the home sale. Eighty-nine percent said they would recommend their selling agent or use the same agent in the future.
Making the Home Purchase
The NAR survey also examined how home buyers paid for their new homes, revealing that 87% of buyers financed their purchases. This share is similar to that of previous years. In addition, the 12% median overall down payment was unchanged from 2019 – that number inched up from 6% to 7% for first-time buyers. The median down payment for repeat buyers was 16% in 2020.
Lower down payments for buyers can be attributed to steadily increasing home prices, according to Lautz. “Because there’s a shortage of housing inventory, we’re seeing prices jump too fast,” she said. “These rising costs make it that much more difficult for buyers to save for a down payment and more challenging for first-time buyers to enter the marketplace.”
Student loan debt was the primary barrier for those who had trouble saving for a down payment, with the average home buyer carrying $30,000 of such debt. Thirty-three percent of home buyers reported having had to make financial sacrifices in order to purchase their home. Forty-four percent of unmarried couples also said they had to make financial sacrifices.
The report found that 26% of first-time buyers called on family or friends to help with the required down payment through a gift or a loan. This share dropped from last year’s 33%.
Other Unique Takeaways
While downsizing was uncommon, sellers over the age of 55 did downsize by an average of 100 square feet. However, these sellers often found a more affordable location when relocating.
For the second consecutive year, sellers cited their desire to be closer to friends and family as their top reason to sell. This trend is higher for those moving farther away, while those moving closer are more likely to cite their desire for a larger home as a primary reason for relocating.
Overall tenure in a home remains at an all-time high at 10 years.
About NAR’s Survey
NAR mailed a 131-question survey in July 2020 using a random sample weighted to be representative of sales on a geographic basis to 132,550 recent home buyers. Respondents had the option to fill out the survey via hard copy or online; the online survey was available in English and Spanish. A total of 8,212 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 6.2%. The sample at the 95% confidence level has a confidence interval of plus-or-minus 1.08%.
Recent home buyers had to have purchased a primary residence home between July of 2019 and June of 2020.
The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.
1 The 2020 edition of NAR’s Profile of Home Buyers and Sellers continues the longest-running series of national housing data evaluating the demographics, preferences and experiences of recent buyers and sellers. Results are representative of owner-occupants and do not include investors or vacation homes.