Homeownership remains a priority for younger consumers despite tight housing inventory and stiff competition for homes—conditions that are driving up prices in many markets, according to Berkshire Hathaway HomeServices’ latest Homeowner Sentiment Survey. Seventy-one percent of prospective homeowners—a demographic composed largely of millennials—believe now is a good time to buy a home, and 63 percent remain steadfast in their ideal preferences for a home.
Not surprisingly, consumers are gaining a deeper understanding of market conditions. Seventy-two percent of prospective homebuyers acknowledge that home-buying has become increasingly competitive with a shortage of listings in many markets across the U.S.; 76 percent of prospective millennial buyers expressed concern of overpaying for a home; and 76 percent said finding a competitively priced home is a challenge.
Several factors have contributed to the current housing shortage in many markets. For starters, new construction ground to a halt during the Great Recession, while population growth and household formation continue to blossom. Builders are increasingly hitting stride on new construction projects in a wider range of price points, but demand still outstrips supply in markets such as Miami, Philadelphia, Chicago, Los Angeles and San Francisco. The vast baby boomer generation has contributed to the shortage, as many are reluctant to sell. In the survey, 73 percent of boomers said they hesitate to list their homes because home values are rising.
Another factor reflects convenience. Four out of five boomers said they would rather not shop for a new property at the moment.
“The world seems to be waiting on millennials to make a move in all facets of their lives,” says Gino Blefari, president and CEO of Berkshire Hathaway HomeServices. “Our data suggests younger generations remain very positive about homeownership and remain in the game in markets where competition for good, reasonably priced homes can be tough.”
Blefari says rising home prices likely will move more boomers off the fence as they retire, downsize and move to other markets.
“Home values have mostly recovered from the downturn and homeowners may have more equity than they’re aware,” Blefari says. “Equity gives people latitude to make important changes in their lives.”
Buyers Stand Apart With Creativity
Increased competition has sparked creativity among consumers looking to stand apart in the market.
- Forty-five percent of prospective homeowners say they are willing to cover closing costs.
- Thirty-six percent of millennial buyers will send a personal letter to sellers.
- Fifty-eight percent of millennials said they would plunk down more of an earnest deposit to show their commitment to sellers.
- Thirty-one percent of millennials indicated they would offer above asking price to secure their home.
“Sure, it can be competitive to secure a good, reasonably priced home,” says Blefari. “To win, consumers must work with a skilled agent who understands the market and will recommend the best ways to secure a home at a fair price.”
Overall, consumer favorability toward real estate and its prospects remains high, as lower mortgage rates and the prospects of rising home values continue to buoy enthusiasm. A full 72 percent of current homeowners expressed a favorable feeling toward the real estate market, with 51 percent pointing to low mortgage rates and 44 percent citing price appreciation for their optimism. Respondents also showed a greater understanding of mortgage rates, with 61 percent of prospective buyers and 63 percent of current homeowners expressing confidence in their knowledge of current rate levels, jumps of two and four percentage points, respectively, from the spring Homeowner Sentiment Survey.
“Historically low mortgage rates continue making homeownership achievable for many Americans,” Blefari says. “We believe mortgage rates will remain within a range of current low levels for the foreseeable future.”
Interviews with 2,518 respondents were conducted online by Edelman Intelligence in July 2017. Respondents captured were either current homeowners (individuals who currently own a home as a primary residence) or prospective homeowners (individuals who do not currently own a home and are likely to buy a home as their primary residence in the next six months). The margin of error is +/-2.18 percent for current homeowners and +/- 4.38 percent for prospective homeowners.
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