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Younger House Buyers Hopeful, Oldsters Trade Down
WASHINGTON -- Young home buyers remain optimistic and see their residence as a good investment. Conversely, older buyers are more likely to trade down to a smaller property to adjust their changing needs.
The 2014 National Association of Realtors Home Buyer and Seller Generational Trends study found that eight of 10 recent buyers considered the houses they purchased a good financial investment; the figures ranged from 87% for buyers ages 33 and younger to 74% for buyers 68 and older.
Lawrence Yun, NAR chief economist, said the millennial generation -- those 33 and younger -- is entering the peak period when people typically buy their first house. “Given that millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand. Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people,” he said in a prepared statement. “However, the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own.”
Just 12% of all recent buyers had delayed their purchase of a housae because of the level of debt they had incurred. Of the 20% of millennial buyers who took longer to save for a down payment, 56% cited student loan debt as the biggest obstacle; 15% of buyers ages 34 to 48 had delayed buying, with 35% citing student debt and 46% citing credit card debt.
Even with the market frictions, the study found that the largest group of recent buyers was the millennials, sometimes called Generation Y or Generation Next, those born between 1980 and 1995. They comprise 31% of recent purchases and are followed closely by Generation X, those born between 1965 and 1979, at 30%.
Percentages of recent house purchases among earlier generations were notably lower; 16% were younger boomers, those born between 1955 and 1964; 14% were older boomers, those born between 1946 and 1954; and 9% were from the “Silent Generation,” those born between 1925 and 1945.
The median age of millennial house buyers was 29, their median income was $73,600 and they typically paid $180,000 for an 1,800-square-foot house. The typical Gen X buyer was 40 years old, had a median income of $98,200 and paid $250,000 for a 2,130-square-foot house.
Some 14% of all houses purchased were for by a multi-generational household that consisted of adult siblings, adult children, parents and/or grandparents. These households were largely concentrated among middle-age buyers, with 22% of younger boomers identified as a multi-generational household.
The biggest reasons for a multi-generational purchase were adult children moving back home and tosave on expenses, each cited by 24% of all multi-generational households. Those were followed by health or taking care of aging parents, 20%, and spending more time with aging parents, 11%.
The previous living arrangement of recent buyers varied by generation. Among millennials, 62% rented an apartment or house and 20% lived with their parents, relatives or friends. Younger boomers and earlier generations owned their previous residencesfor the most part, with older buyers much more likely to have been homeowners.
The reason for buying a house also varied across the generations: millennial through the younger boomers most often cited the desire to own a home of their own, while 79% of older boomers cited retirement and the Silent Generation most often wanted to be closer to family and friends.
The study found that boomers purchased a house already built, compared with 87% of millennials.
Although most purchases by all generations were in a suburban area, millennials were more likely to buy in an urban or central city area, 19%, compared with only 12% of older boomers. The Silent Generation was more likely to buy in a small town, 24%, They also were more likely to purchase in senior related housing, cited by 26% of older respondents.
When it comes to the environmentally friendly features of a residencr, younger buyers placed higher importance on commuting costs than older generations, who placed higher importance on energy efficiency, landscaping and community features.
The millennials plan to stay in their houses 10 years while the baby boomers as a whole plan to stay for a median of 20 years.
All buyers, regardless of age, typically began the process of buying a house by looking online for properties for sale and then contacting a real estate agent, although millennials also looked online for information about how ro buy a house before they got in touch with an agent.
Younger buyers were more likely to learn about the houses they purchased through the Internet. Older boomers and the Silent Generation most often learned about the houses they purchased from their real estate agents.
Nearly nine of 10 buyers financed their purchase, but those paying all cash increased with age. Among the Silent Generation, 45% paid cash. Similarly, for those who secured a mortgage, the down payment percentage increased with age, ranging from 5% for millennials to 23% for the Silent Generation.
Younger buyers who took out mortgages most often relied on savings for their down payments where older buyers were more likely to use proceeds from the sale of a primary residence. Younger buyers also were more likely to receive a gift from a relative or friend, typically their parents, cited by 26% of millennials and 16% of Generation X.
Younger buyers typically moved to larger, higher-priced houses, but there is a clear trend of downsizing to smaller residences among all baby boomers and the Silent Generation.
The reasons for selling a home also varied by generation. Younger sellers were more likely to need a larger residence or move for job relocation. In comparison, older buyers wanted to be closer to family or friends, or said their house was too large or they were moving because they were retiring.
The older the seller, the longer they had been in their houses, millennials a median of five years, the Silent Generation 14.
Published by The Business Journal, Youngstown, Ohio.
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