By Jennifer Riner, Zillow
The typical homebuyer has changed drastically in recent decades. Given economic and societal changes in America over the years, it’s no surprise the demographic of today’s homebuyer is different. For starters, today’s average first-time homebuyer is 33 years old, compared to just 30 years of age in the late 1980s.
To better understand the shifting demographic of American homebuyers, consider these changes.
Renting Reigns Supreme
Even though homeownership is actually more affordable when considering rental rates versus mortgage payments, many homeowners are renting longer before they commit to property purchases. In fact, buyers rent for six years before investing in their first homes. In 1970, buyers only waited 2.6 years before they purchased property. In the late 1980s, homebuyers rented 4.4 years before buying their first homes, so the delay has been a steady progression over the past decades.
Renting is more expensive than ever, so some erroneously assume buying is the more popular option. Saving for a down payment takes time and discipline, and might not be at the top of millennials to-do lists. Further, raised rental rates might make it near impossible to even try and save for a down payment in a timely manner, especially seeing today’s renters skimp on health care just to afford their monthly payments.
Buyers are Single
In the 1980s, the majority (52 percent) of first-time homebuyers were married. Now, only 40 percent of homebuyers have tied the knot. Marriage rates in general are down across the country, and buying a home is no longer a jointed effort. Because first-time buyers aren’t married, a single income might be the reason it’s taking them longer to save for their down payments than in the past. According to Brandi Pearl Thompson, a real estate agent in Chattanooga, TN, singles tend to be more fickle with their must-haves in their first time homes. Without a partner, renovations and repairs pose a bigger threat – both financially and emotionally.
Buyers Have Higher Budgets
Another reason buyers might be renting longer is because their budgets increased. Today, buyers spend 2.6 times their annual income on their first homes. In the 1970s, buyers spent only 1.7 times their annual income on their first homes. Overall, Americans are buying increasingly expensive first homes and spending more, relative to their incomes, than any time in the past 40 years.
Home affordability and mortgage rates might be an issue, but first-time buyers might also have unrealistic aspirations when juxtaposed with their income levels. With virtually limitless layouts and design ideas to peruse online, it’s natural to have hardwood dreams on a laminate budget. The median home price has risen from around $108,000 in 1985 to about $140,000 in 2010, so the increase in percent of income spent on a home could also be a result of the ever-shifting housing market. In addition, the housing markets popular amongst millennials – often cities on the coast – are more expensive than the suburban markets where buyers used to flock.
Although the first-time homebuyer profile has shifted, everyone has different financial and lifestyle goals. Some prefer the renting lifestyle, albeit more expensive, because it doesn’t require maintenance or a long-term commitment. Regardless of whether you want to rent or buy, finding a home within your budget is key.