Author: Igor Nastaskin

The National Association of Realtors just released the results of their 2015 Home Buyer and Seller Generational Trends survey, and it shows that for the second year in a row, Millennials are the largest group of home buyers, at 32 percent. They were closely followed by members of Generation X, who represented 27 percent of home buyers. Researchers discovered that the majority of individuals who purchased homes used the Internet, via a computer or mobile device. However, nearly as many used a realtor to shop for a home, with an overwhelming 88 percent using the Internet and 87 percent taking advantage of a realtor. According to NAR President Chris Polychron, this demonstrates that in spite of the information provided by the web, realtors still have a significant place in the home buying process. The majority of Millennials stated that the desire to own a home was a reason for their purchase, and both Millennials and Generation X members believed that home ownership was a good investment. Despite obstacles like the housing downturn and its slow recovery, numerous young adults are attracted by the stability offered by owning a home. Millennials surveyed indicated that proximity to a job and quality of a neighborhood were some of the most important factors in deciding which home to buy. The survey also found that the average age of a buyer from this generation was 29, and they had a median income of $76,900 and purchased a home costing about $189,900. Generation X members were typically 41, with a median income of $104,600 and bought a home that cost $250,000.

Bidding wars were something that were uncommon in the 1980s and 1990s, but they took place frequently during the housing bubble. However, what’s surprising is that they haven’t disappeared after the housing slump, and they are still going strong in a few areas. Based on data from the National Association of Realtors, researchers at the University of Toronto’s Rotman School of Management discovered that bidding wars took place in about three percent of sales prior to the bubble. At the bubble’s peak, 30 percent of homes bought in Washington, D.C. and 26 percent in Los Angels were involved in bidding wars. It is believed that although this new way of buying and selling houses gained purchase during the housing bubble, it isn’t exclusive to it. Experts have suggested that this is a new way of selling homes; it has long been common practice in Australia to purchase a home through an auction process, so there is no reason for it to not become the norm in the U.S. However, there are some potential downsides for inexperienced or first-time buyers. There are two ways that a seller can list a home: with an aspirational price or with a price aimed to create a bidding war. Aspirational prices are those that a seller would like to get but anticipates will be negotiated down. Prices designed to create a bidding war are generally less than what someone is willing to accept and are expected to rise as sellers compete. When buyers are unsure of which price they’re looking at, it can create confusion as to the actual value of a home and whether they can actually afford it.

Mortgage research site HSH.com recently completed a study that determined how much money someone would need to make annually in order to afford a median-priced home. They looked at 27 metro areas and calculated what people’s salary would need to be to cover the principal as well as taxes, insurance payments and interest. HSH.com discovered that although homebuyers need to make a salary of $48,604 to afford a median-priced home in America on average, the salary requirements vary wildly depending on the location in question. For example, in places like St. Louis, the required salary was around $34,000. However, in more upscale areas, like Los Angeles and San Diego, salary requirements for a median-priced home could be upwards of $90,000. San Francisco had the highest income requirements, coming in at $142,448! Researchers involved in the study made a few assumptions to obtain their numbers. Homeowners were to have put 20 percent down on their home and spend 28 percent of their gross monthly income on housing costs. To figure out how much the costs of a home were and the taxes, interest and insurance payments someone would be likely to face, they used a variety of sources for data. This included information from the National Association of Realtors on home prices, Tax Foundation data regarding property tax for metro areas and average homeowner premium costs from the Insurance Information Institute. HSH.com used its own data to determine the average interest rate for 30-year, fixed-rate mortgages.