Who’s buying homes, who’s selling them, and what types of homes are inspiring bidding wars all look a little different this year as the country remains in the throes of the coronavirus pandemic.
Those who managed to nail a home purchase after the COVID-19 pandemic began spreading through the United States were more likely to pay dearly for larger, more expensive homes in the suburbs, according to the National Association of Realtors® 2020 Profile of Home Buyers and Sellers. The annual report breaks down the characteristics of buyers, sellers, and the homes they bought and sold. It was based on responses from more than 8,200 buyers and sellers who completed their transactions between July 2019 and June 2020.
“Buyers who are out there have a higher income and are financially secure and need to find a house that will work for their family,” says Jessica Lautz, NAR’s vice president of research.
And prices just keep going up and up. Buyers paid more for these homes—a median $339,400 since April, compared with $270,000 before the crisis, as prices climbed as a result of competition flooding a market with a stark lack of inventory.
That’s a nearly 27% increase in just a few short months.
The throngs of buyers lured by record-low mortgage interest rates and the need for more space (home office anyone?) have led to a surge in offers over asking price, bidding wars, and homes selling within days of being listed, or sometimes hours.
About 57% of these buyers closed in the suburbs, up from 50% last year. However, urban sales also ticked up slightly from 12% to 14% as the pandemic dragged on.
“Some of this is normal; it happens every year,” says realtor.com Chief Economist Danielle Hale. “We do know that spring and summer buyers tend to be families who purchase larger, more expensive homes.
“But some of it could be driven by the pandemic,” adds Hale.
Today’s buyers haven’t been as affected by the downturn brought on by the coronavirus and have held onto their jobs, despite the worst unemployment since the Great Depression. (Unemployment has been highest among customer-facing workers, such as lower-paid restaurant, retail, and other employees who can’t work remotely.) Those who bought in April and after had median household incomes of $100,800 compared with a median $94,400 for those who closed before the crisis.
“People who are in the market right now who have kept their jobs and have relatively steady income, so have been able to take advantage of low mortgage rates,” says Hale. Rates fell to an all-time low of 2.78% for a 30-year fixed-rate mortgage in the week ending Nov. 5, according to Freddie Mac.
Pandemic buyers don’t expect to stay in their homes as long as those who bought before the public health crisis. They plan to be in their new homes for 10 years, compared with 15 years.
“People are saying, ‘I just need to find a home that’s right for me right now. Perhaps after the pandemic, I’ll continue living here or find a new place,'” says Lautz.
They also tend to be a bit more family-focused than they were before the deadly virus. They’re more likely to buy a multigenerational home for themselves and their aging parents, grown children, or grandchildren—or all of the above. About 15% of buyers purchased such homes in April and afterward versus 11% before the pandemic.
“They need to find a home that will have enough room for all of these adults who suddenly are living together,” says Lautz. “It’s to take care of and spend more time with an elderly parent. Adult children may also be back at home with their families.”
Fewer first-time buyers became homeowners this year
Overall, the number of successful first-time home buyers fell this year as the pandemic and the struggling economy took their toll. That could be because these buyers, who tend to be younger and make less money, may have been hurt more by the recession.
First-time buyers, a median 33 years old, made up about 31% of sales. That was down a little from 33% last year and is the lowest it’s been since 1987, when they made up 30% of the share.
“Even with low interest rates, it’s hard to find an affordable home with the lack of housing available,” says Lautz.
This group had an $80,000 median household income, lower than repeat buyers at $106,700. They also had lower down payments, of a median 7%. That’s because they earned less, were contending with student loan debt, and didn’t get as much family help. The median down payment for all buyers was 12% of the purchase price.
Just over a quarter, 26%, of these buyers received financial help from their families on their home purchase—compared with 33% last year. Student loans were the biggest obstacle for saving up for a down payment. Buyers typically carry about $30,000 in student loan debt.
That’s why the homes they purchased were more affordable than those bought by repeat buyers. First-time buyers spent a median $230,000—about 18% less than the median $272,500 price of all homes sold.
“Younger buyers, first-time buyers are less established and have to make sacrifices,” says Hale. “It is a challenge buying a home.”
Not surprisingly, their homes tended to be smaller, at a median 1,680 square feet. That’s a little more than 200 square feet in difference from buyers overall.
Repeat buyers were a median 55 years old and bought 2,020-square-foot homes for a median $297,000.
Overall, the typical buyer this year is middle-aged, is coupled up, and makes good money. These folks are a median 47 years old and have a $96,500 median household income.
Buyers were also overwhelmingly white, making up about 83% of those who purchased homes. Hispanics made up about 7%, followed by Asians and Blacks, both at 5%.
“It is not just a reflection of the makeup of the country, but also a reflection of how income and wealth are spread out among different racial groups,” says Hale.
Sellers made more money during the pandemic
Homeowners who sold their properties during the pandemic were more likely to cash in as prices spiked nationally. Those who sold after March scored a median $300,000 for their residences. That’s nearly $30,000 more than those who sold before the virus for a median $270,700.
Pandemic sellers were more likely to put their homes up for sale because they felt they were too small. About 18% did so after the March lockdowns, compared with 13% who sold their abodes before March.
“Sellers have more urgency to find a place that fits their family’s needs during the pandemic,” says Lautz.
Sellers tended to be older, a median 56 years old, and wealthier than buyers with median household incomes of $107,100. They lived in their homes for about a decade before putting them onto the market.
Their homes sold in about three weeks for 99% of the final list price. They made a median $66,000 on their sales compared with what they had originally paid for their properties.
The hottest housing in 2020
As folks increasingly sought out additional square footage and the ability to better socially distance, detached, single-family homes remained the top type of housing purchased this year. That makes sense as folks forced to work and school their children from home sought out larger spaces, home offices, and bigger backyards to safely socialize in.
The typical home bought this year was a three-bedroom, two-bathroom with approximately 1,900 square feet. Homes sold were a median 27 years old.
“People are seeking more space either to home-school or work remotely or have more personal space,” says Lautz.
Overall, homes sold for a median $272,500. Buyers purchased properties a median 15 miles away.
“Larger, more suburban homes were a trend that existed even before the pandemic,” says Hale. “Of course, we’ve seen that trend accelerate due to the havoc the coronavirus has wreaked on all aspects of life.”