What Will Future Homebuyers Look Like?


American homebuyers are getting older and industry leaders are preparing to welcome more Hispanic homeowners in the coming decades.

According to the 2023 Home Buyers and Sellers Generational Trends Report by the National Association of Realtors, members of Gen X between 43 and 57 years old made up 24% of recent buyers. They were followed closely by younger Baby Boomers who, between 58 and 67 years old, represented 23% of recent buyers.

Older Millenials between the ages of 33 and 42 accounted for just 16% of recent purchases.

The typical first-time homebuyer is 36, and the typical repeat buyer’s age climbed to 59 last year. Those are the highest ages recorded, a press release for NAR’s Profile of Home Buyers and Sellers says.

Between 1974 and 1979, the median age for a first-time buyer was 29, according to a 2015 Zillow analysis.

Doug Ressler, Business Intelligence Manager at Yardi Matrix, spoke with The Mortgage Note recently and explained that Gen Xers had the highest household incomes of any generation at $114,300 in 2021.

They were also more likely to be repeat buyers, which meant they had money from the sale of a home to put into a purchase.

The typical down payment for first-time buyers was 6%, while the typical down payment for repeat buyers was 17%.

“Younger buyers continue to depend on savings for their down payment, while older buyers use proceeds from the sale of their previous residence. 22% of younger Millennials received down payment help in the form of a gift or a loan from a friend or relative,” Ressler said.

Ressler said 78% of homebuyers financed their home purchase, but where they got the money for their down payment differed from generation to generation.

“For 47% of buyers, their down payment came from their savings. 38% of buyers’ down payments came from the proceeds from the sale of a primary residence,” Ressler said. “57% of older Millennials and 64% of younger Millennials used savings for their down payment, compared to only 28% of the Silent Generation. Older buyers were more likely to use equity from a past home. Younger Millennials used a gift or loan from friends and family more than any other generation.”

As younger Millennials and members of Gen Z age, will there be enough homes for everybody?

Ressler added that the residential market is seeing intense construction activity, albeit less robust than needed to meet the national housing deficit which Freddie Mac estimates at an additional 3.8 million units.

Nationally, more than 8.3 million building permits were issued for single-family homes and almost 5 million for multifamily units in the last 10 years. While the single-family market is lagging with fewer permits for new homes issued in the 10 years ended 2022 than in any decade since the 1990s, the multifamily sector is progressing toward an easing of the nation’s housing issues.

How that helps future buyers remains to be seen.

Leaders are preparing for more Hispanic homebuyers.

According to the Urban Institute, between 2020 and 2040, 70% of new homeowners will be Hispanic, while no net new homeowners will be white.

UnidosUS, a nonprofit, nonpartisan Hispanic civil rights organization, recently launched HOME (Home Ownership Means Equity), an initiative that seeks to influence systemic change and create four million new Latino homeowners by 2030. Wells Fargo is the first anchor funder of the HOME initiative as part of a larger, $25 million philanthropic investment.

Valeria Esparza-Chavez, Head of Home Lending for the Hispanic Segment at Wells Fargo, said the HOME initiative will help aspiring homeowners create pathways to build their credit, afford a down payment, overcome language barriers, avoid predatory lending, and get approved for a sustainable mortgage.

“Specifically, the UnidosUS HOME agenda will preserve homeownership by enhancing accessibility of home renovation loans, supporting policies facilitating inter-generational wealth transfer, and providing housing counseling to help prospective Latino homeowners make informed decisions in their homebuying journey,” she told The Mortgage Note.

Wells Fargo strives to increase home lending to traditionally under-served communities by removing systemic impediments to homeownership for communities of color and creating a more inclusive housing system, Esparza-Chavez said.

Esparza-Chavez said areas of focus include:

* Optimizing the Retail team to focus primarily on bank customers and underserved communities

* Investing an additional $100 million to advance racial equity in homeownership, including strategic partnerships with non-profit organizations and community-focused engagements

* Deploying additional Home Mortgage Consultants in local minority communities

* Wealth Opportunities Restored through Homeownership, or WORTH, a $60 million national effort by the Wells Fargo Foundation to address systematic barriers to homeownership for people of color. Nationally, WORTH aims to help create 40,000 new homeowners of color in eight markets by the end of 2025.

* An expansion of their closing cost credit, which provides borrowers with an income at or below 80% of the area median income where the property is located up to $5,000 to use toward closing costs. The credit is available in 18 metropolitan areas.

* Growing Diverse Housing Developers, a $40 million grant initiative focused on expanding the growth and success of real estate developers of color, including Black and Latino-owned firms.

“We will focus on investing in local staffing, as well as hiring home mortgage consultants who reflect the communities we serve. Hiring is underway in several communities, including Dallas, Philadelphia, and New York,” Esparza-Chavez said.

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