- More space, expanding households and low interest rates drive purchases
- Majority of buyers consider extended family in 2021 home buying decision
- Close to 60% of buyers seek a home priced at $350,000 and below
- Buyers plan to leverage technology and extra money to secure a home
- 3 bedrooms, 2.5 bathrooms top list of desired home layouts
- Garages, updated kitchens and quiet locations are the most important home features
- 62% of buyers plan to move away from their current city or town
- Affordability Is the principal reason buyers plan to move
Real estate markets have experienced dramatic changes over the past year, as the global COVID pandemic dominated the headlines and constrained most people’s daily lives. Following sharp drops in activity during the 2020 quarantines, and supported by massive legislative, regulatory and monetary initiatives, housing markets led the rebound, and saw a full recovery after twelve months. The first six months of this year have seen a market for homes dominated by extremely low inventory, frenzied buyers looking to lock in historically-low mortgage rates, and skyrocketing prices reaching new highs.
While this market offered many sellers great opportunities to cash in record amounts of equity, many remained hesitant, either due to the pandemic, the economic and employment uncertainties, or their own difficulties finding a suitable replacement home, amid a dearth of inventory. In turn, buyers faced not only each other, but increasingly, deep-pocketed investment and asset management funds who have been buying up an increasing number of homes with the goal of converting them into rental properties.
In a highly competitive and frantic market, buyers having been seeking to balance the pandemic realities, desired home features and locations, family considerations, price pressures, and the expectations of the post-pandemic future. As we move into the new normal, markets remain undersupplied, with builders limiting production of new homes in an effort to manage sharp cost increases. For buyers, the dramatic changes of the past year have resulted in shifting preferences, with versatility, space and flexibility in living arrangements propelling housing choices. In the wake of unprecedented quarantines, business closures and social distancing, extended family, pets, home offices and connectivity play a more dominant role in home buying decisions.
Within this context, realtor.com® partnered with HarrisX to survey a national sample of consumers who indicated they plan to buy over the next 12 months. The results illustrate a challenging market for many buyers, where larger down payments, offers above asking prices, and all-cash purchases are common. At the same time, buyers are willing to compromise on home features to meet their families’ needs in a competitive market.
More Space, Expanding Households and Low Interest Rates Drive Purchasing Decisions
Buyers in this year’s real estate markets are motivated by several important factors in their shopping process. Leading the list is the need for more space, which illustrates the shifting life stages for many Americans. As we have seen during this past year, consumers have redefined their relationship with homes, and are expecting them to be more versatile, multi-functional spaces, with more square footage.
The second highest motivator for this year’s buyers is the historically-low interest rate environment. Spurred by the dramatic shocks of the pandemic lockdowns and ensuing closures of businesses, and riding a large wave of monetary stimulus, interest rates for Freddie Mac’s 30-year fixed rate mortgage declined from 3.65% during the week of March 19, 2020 to a record low of 2.65% during the first week of January 2021. While rates rebounded from that low over the past six months, they remain below 3.0%, providing strong incentive for buyers looking to lock in a predictable monthly payment over a long period.
Coming in third place and highlighting the maturing of the millennial generation, expanding households are another top reason for this year’s potential buyers to seek a home. From moving in with a partner, to having children, and caring for aging parents, larger families are looking for a home that can fit their growing needs.
Generationally, the data point to varying stage-of-life dynamics. For younger buyers, the need for more space blends with growing households to prompt seeking for a home. This is especially true for millennials and Gen Z potential buyers, who are moving into new stages, with Gen Z graduating and making its foray into professional careers, and millennials stepping well into their 30s and having children. The other important reason for seeking to buy in 2021 for millennials and Gen Z respondents is the fact that the past year offered them the chance to save enough money to put toward a home purchase.
Moving up the age spectrum also shifts some of the reasons. For Gen X potential buyers, the need for more space is still at the top, but low interest rates are a more important motivator, followed by the “Other” category. Interestingly, the “Other” category ranks at the top for Baby Boomers and members of the Silent generation, with about four-in-ten of each generation saying that their reasons for buying are mostly reflective of their stage of life. At the top of the “Other” list is the desire to downsize, followed by wanting to move. Potential buyers also list the desire to be closer to family and friends, being tired of renting, and an interest in a vacation or investment home as part of top reasons in the “Other” category. For Baby Boomers, low interest rates are the second-highest reason for looking for a home. And potential buyers in the Silent generation indicate that in their markets, as buying becomes cheaper than renting, it prompts them to consider purchasing a home.
Across geography, the distribution of reasons to buy are fairly similar for the four major regions of the country. The need for more space is at the top in the Northeast, South and West. The “Other” category ranks at the top in the Midwest.
Majority of Buyers Consider Extended Family in Their 2021 Home Buying Decision
The importance of family comes across as a recurring and important theme for buyers in 2021. The pandemic and social distancing requirements have elevated the role of family and friends for most Americans this past year. Not surprisingly, 75% of potential buyers we surveyed say that they are considering extended family when making their home-buying decisions. Of those, 30% plan to buy a home that can accommodate extended family staying part-time or visiting. Twenty-four percent of buyers plan to buy a home near extended family, and 20% plan to buy a home that can accommodate extended family living together full time. These preferences are fairly similar across geographic regions, with 70% or more of buyers taking family into account during the buying process.
However, family consideration is more nuanced across generational groups. Millennial and Gen Z buyers are most likely to consider extended family in their purchasing decision, planning to buy a home near family or buying a home that can accommodate visiting family members. A slightly lower—but still elevated at 69%—share of Gen X buyers take family into account, mostly planning to have space which can accommodate short-term visits. Baby Boomer and Silent generation buyers are still considering family in their buying decisions, but at lower rates.
Close to Six-in-Ten Buyers Seek a Home Priced at $350,000 and Below