More home buyers nationwide, particularly across the southern US, are trading up to bigger abodes. According to the 2015 Profile of Home Buyers and Sellers report produced by the National Association of Realtors (NAR), 42% of all buyers regardless of region purchased larger homes in 2015, up from 40% in 2014. The most common reason cited for wanting to sell a home was that it was too small.
Improving employment levels nationwide and low interest rates are driving buyer confidence and spurring consumers to go big while market conditions are rosier than in recent years.
Regions with the highest percentage of buyers looking to trade up include East South Central (comprising Alabama, Kentucky, Mississippi, and Tennessee) and West South Central (including Arkansas, Louisiana, Oklahoma, and Texas).
The South continues to attract home buyers. The US population is shifting to the South and West, with these regions growing by 14% during the past decade, surpassing the 3% growth rate in the Northeast and Midwest, according to Harvard’s Joint Center for Housing Studies.
Sellers are taking advantage of home prices that have risen since the recession, tapping into well-earned equity for more elbow room.
By waiting just one year, sellers are taking home more at closing. Home owners in 2015 are selling their homes for $40,000 more on average than they purchased it, up from $30,100 in 2014.
The demographic that is stepping up to buy and sell has been somewhat surprising as well, even to economists.
Despite what economists had predicted earlier this year, older clients are dominating the market. According to the NAR report, the average home seller is 54 years old, with a median household income of $104,000. Typical home buyers are 44 years old and have a median household income of $86,100.
First-time buyers, many of whom would be millennials, are sitting tight for now. Economists had anticipated (and were hoping) that first-time buyers’ pent-up demand would create a wave of new homeowners entering the market. This hasn’t been the case.
Instead, millennials have grown conservative as a reaction to the recent recession. Increasingly priced out of the recovering housing market, first-time buyers are sitting on the sidelines despite being enticed by low mortgage-interest rates.
Saddled with student debt, millennials cited saving for a down payment as the biggest hurdle to home ownership. As a result, the percentage of homes sold to first-time buyers has dropped to its lowest level since 1987, according to the NAR. First-timers fell to 32% of all purchasers in 2015 from 33% last year; the NAR’s historic average is 40%.
Industry Impact — Residential real estate brokerages should anticipate more buyer interest in their larger listings, particularly in the South, from 40-something and 50-something clients as more home buyers and sellers trade up to bigger homes.
Tracking the moves of consumer products makers since 2003, Catherine Colbert is a company insights writer and blogger. Before covering companies, she spent ample time in magazine publishing, technical writing, ad copywriting, medical writing, and marketing. Follow her on Twitter.