Low mortgage rates continue to ease affordability concerns for both first-time buyers and repeat buyers. But the limited number of homes for sale, high prices and now coronavirus pose a challenge, particularly in the Washington, D.C., region. Still, the number of homes that sold in the region climbed 20.2 percent in December 2019 compared with December 2018, the largest percentage gain in year-over-year sales since November 2012.
The median sales price in the region of $459,950 set a record for December, which can benefit homeowners who want to sell and move up or downsize. But the number of homes for sale declined for the 11th month in row, down to just 5,489 in December, the lowest monthly level in a decade. While there is not much inventory, it is turning over fast with fewer days on market than in past years.
While the D.C. area does not always mirror the rest of the country, data from the National Association of Realtor’s 2019 Profile of Home Buyers and Sellers paints a picture of who is buying homes, how they find homes, what they buy and how they finance them.
Profile of home buyers
Nationally, 33 percent of home buyers were first-timers in 2019, with a median age of 33, according to NAR’s report. Among first-time buyers, 64 percent said the main reason they chose to buy their home was because of a “desire for a home of one’s own.” That emotional choice of homeownership ranks as the prime reason for all buyers to make a home purchase. Nearly one-third (29 percent) of all home buyers mentioned that as their main reason for purchasing in 2019, followed by just nine percent saying they bought a home to be closer to friends and family.
Twenty-three percent of first-time buyers lived with friends or family before they bought their first home, evidence that saving for homeownership may be easier when sharing living expenses. Saving for a down payment was a challenge for 13 percent of buyers -- largely because of student loans, credit card debt and car loans, according to those buyers.
The myth that buyers need to make a down payment of 20 percent continues to discourage some would-be purchasers, but the median down payment for first-time buyers was just six percent in 2019. Even repeat buyers do not always make a larger down payment: The median for repeat buyers was 16 percent in 2019.
Sixty percent of all buyers said their down payment funds came from their savings. For first-time buyers, 78 percent used savings and 27 percent used a gift from a relative or friend.
A traditional path to adulthood has historically been to marry, buy a house and have children, but among buyers in 2019, 61 percent were married, 17 percent were single females, 9 percent were single males and 9 percent were unmarried couples. More than one-third (35 percent) of buyers have children under age 18, and 12 percent purchased multigenerational homes to include aging parents or adult children in their home or to save money.
Finding a home to buy
While saving for a move and financing a property can be challenging, searching for a home in a market with limited homes for sale requires help. Eighty-nine percent of buyers purchased their home with the help of a real estate agent or broker, with five percent buying directly from a builder. To get started, 44 percent of buyers looked at properties online first and 16 percent contacted a real estate agent first. The majority of buyers (52 percent) said they most wanted an agent to help them find a house.
Buyers typically searched for 10 weeks for a house before buying and looked at a median of nine homes. Eighty-seven percent purchased an existing home and 13 percent purchased a newly built home. Single-family houses are by far the most popular home type nationwide. Eighty-three percent of buyers purchased a single-family house compared with just five percent choosing a townhouse and five percent buying condos.
Whether you fit the average home buyer or not, there are still many pathways to homeownership, even in a market with limited homes for sale.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS (formerly MRIS), writes occasional commentary on the Washington area housing market.