By Terry Bremer Allison, JD, REALTOR®, CNE
Manager, Coldwell Banker Brokers of the Valley
Ah! Spring! Sunshine! Buds on the vines, blossoms in the garden, and time for annual publication of the National Association of REALTORS® (NAR) Home Buyer and Seller Generational Trends report.
Every year NAR surveys a random sample of American consumers who have participated in home sales transactions. The 2017 report just released is based data gleaned from surveys of buyers who purchased homes between July 2015 and June 2016, and their respective income data from 2015. More than 93,000 home buyers received the study’s 132-question instrument and the adjusted response rate was 5.9 percent.
By way of definition, the generational cohorts for the survey were defined as follows: Younger Millennials (ages 26 and under); Older Millennials (ages 27 to 36); Generation X (ages 37 to 51); Younger Boomers (ages 52 to 61); Older Boomers (ages 62 to 70); and, the Silent Generation (ages 71 and above).
Gen X-er’s, Not Just Millennials, Face Home Buying Challenges
We frequently read or hear about the challenges facing many Millennials seeking to climb on the property ladder: student loan debt, poor credit history, lack of down payment funds, and unemployment or under-employment with insufficient income to afford rent, let alone a house payment. The newest NAR survey sheds light on Generation X consumers who delayed buying because they, like Millennials, had debt, but they also had little or no equity in the homes they owned. Gen X homeowners were the most likely among the generations surveyed to have previously sold a distressed property. They reported that they had significant student load debt, an average of $30,000, and they stated that they would have liked to sell their home sooner but they couldn’t because the house was worth less than their mortgage balance.
NAR Chief Economist Lawrence Yun summarized the situation faced by numerous Gen X households: they bought their first home, started a family, and entered the middle part of their careers only to be shaken by job losses, falling home values, and overall economic uncertainty during and after the Great Recession. Yun went on to say, “Gen X sellers’ median tenure in their previous home was 10 years, which puts many of them selling a property they bought right around the time home values were on the precipice of declining. Fortunately, the much stronger job market and 41 percent cumulative rise in home prices since 2011 have helped a growing number to build enough equity to finally sell and trade up to a larger home. More Gen X sellers are expected this year and are definitely needed to ease the inventory shortages in much of the country.”
Sellers Who Bought 10 Years Ago Could Be Pleasantly Surprised
The Sonoma Valley and Napa Valley are two areas facing extreme inventory shortages at many popular price points. Based on the NAR study data, perhaps we need to reach out to the sellers who bought at the height of the market and share with them the good news that their houses today likely are worth more than the prices they paid, provided, of course, that they didn’t use their property as an ATM machine in the interim, pulling out equity via refinancing or home equity lines of credit. We need to do something to break the log jam of no inventory of previously owned homes to sell and no place local for the Gen X sellers, or any other sellers, to purchase as replacement property.
As expected, the NAR survey results showed that Millennials were the largest group of recent buyers, 34 percent, for the fourth consecutive year, but their share was down from last year when it registered at 35 percent. Gen X buyers in the survey tallied 28 percent, Baby Boomers comprised 30 percent of buyers, and the Silent Generation made up 8 percent.
Multi-generational Homes Fit Needs of Boomers with Boomerang Kids
Another familiar theme seen within survey results this year was that of Baby Boomer parents, especially middle-aged Younger Boomers, purchasing “multi-generational” homes because their young adult children had either moved back home or had never moved out. With residential rents at all-time high levels, student loan debt repayment requirements, and low entry-level salaries, young people must share housing with multiple roommates or live at home with the folks.
Survey results showed that about two-thirds of the Millennial respondents were married, and nearly half of them had at least one child. The more children in Millennial households, the more space the families require, and to obtain affordable additional space, the Millennials who purchased as a couple in an urban area, now are looking to buy replacement homes outside big cities. The survey showed that only 15 percent of Millennial buyers bought in an urban area, which is down from 17 percent last year and 21 percent two years ago.
Anecdotally, our agents get many calls from Millennials who want to move back home to the wine country valleys where they grew up, because they want to raise their own children in Sonoma or Napa, with a familiar quality of life and lifestyle. What and where can they purchase if there’s no housing stock inventory expansion? It’s time for the equity rich home owners, be they Gen X or Boomers or members of the Silent Generation, to step up and get moving on the property ladder to replacement homes that fit their current needs, making room for the up and comers.