Dual income households fuel us market recovery

Photo credit: Michael Patrick

Dual income households are fuelling the US property market recovery, according to the National Association of Realtors.

The NAR's annual survey, released this week, shows that dual income homes are accounting for an increasing portion of property transactions:  65 per cent of all buyers are married couples, compared to just 16 percent single women, 9 percent single men, 8 percent unmarried couples and 2 percent other.

Compare that to just two years ago and 58 percent of buyers were married, 20 percent were single women, 12 percent single men and 7 percent unmarried couples - a sign that not only is the share of single buyers shifting, but that the market itself has transformed radically. Indeed, before 2010, the shares only moved within a very narrow range, generally a percentage point or two.

Paul Bishop, NAR vice president of research, said the study is painting a clearer picture of the impact of mortgage limitations.  "We've known for some time that stringent mortgage credit standards have been holding back home sales, but these findings show single buyers have been hurt the most over the past two years.  Total home sales would be 10 to 15 percent higher without these unnecessary headwinds," he said.

"The continued growth in married couples as single buyers shrink demonstrates that households with dual incomes are more successful in obtaining a mortgage.  However, given the historically favorable housing affordability conditions, most single-income buyers could also purchase a home and stay well within their means, if lending requirements were more sensible," Bishop said.

First-time home buyers edged up to a 39 percent market share in the past year from 37 percent in the 2011 study.  Long-term survey averages show that four out of 10 buyers are typically first-time buyers, who are critical to a housing recovery because they help existing home owners to sell and make a trade.

The study shows the median age of first-time buyers was 31 and the median income was $61,800.  The typical first-time buyer purchased a 1,600 square-foot home costing $154,100, while the typical repeat buyer was 51 years old and earned $93,100.  Repeat buyers purchased a median 2,100-square foot home costing $220,000.

The median downpayment for all home buyers was 9 percent, ranging from 4 percent for first-time buyers to 13 percent for repeat buyers.

"First-time buyers historically make small downpayments, but repeat buyers like to put down 20 percent if they can to avoid paying mortgage insurance," Bishop said.  "The general loss in home value since the peak of the housing boom means many repeat buyers in recent years had to make smaller downpayments.  Fortunately, prices have turned up this year and are showing sustained increases, so we're on the road to a recovery in home equity."

First-time buyers who financed their purchase used a variety of resources for the downpayment:  76 percent tapped into savings; 24 percent received a gift from a friend or relative, typically from their parents; and 6 percent received a loan from a relative or friend.  Eleven percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds.  Ninety-three percent of entry-level buyers chose a fixed-rate mortgage.

Forty-six percent of first-time buyers financed with a low-downpayment FHA mortgage, and 10 percent used the VA loan program with no downpayment requirements.  Forty-two percent cut spending on luxury items to buy their first home, 35 percent cut spending on entertainment and 27 percent cut spending on clothes.

Seventy-eight percent of recent home buyers said their home is a good investment, and 46 percent believe it's better than stocks; 92 percent were satisfied with the buying process.

The typical buyer began their home search online and then contacted a real estate agent.  Buyers who used an agent searched a median of 12 weeks and visited 10 homes, down from 12 homes in 2011.

"The decline in the number of homes visited reflects a tighter inventory environment that became more pronounced during the second half of the survey period," Bishop explained.  "It makes sense that buyers are seeing fewer homes in the current market."

Buyers use a wider variety of resources in searching for a home.  Top results show 90 percent use the Internet, 87 percent use real estate agents, 53 percent yard signs, 45 percent attend open houses and 27 percent review print or newspaper ads.

When buyers were asked where they first learned about the home they purchased, 42 percent said the Internet; 34 percent from a real estate agent; 10 percent a yard sign or open house; 6 percent from a friend, neighbor or relative; 5 percent home builders; 2 percent directly from the seller; 1 percent a print or newspaper ad; and less than 1 percent from other sources.

Ninety-one percent of home buyers who used the Internet to search for a home purchased through a real estate agent, as did 71 percent of non-Internet users, who were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.

While sellers had been in their previous home for a median of nine years, first-time buyers plan to stay for 10 years and repeat buyers plan to hold their property for 15 years.

Commuting costs continue to factor strongly in decisions regarding location, with 75 percent of buyers saying transportation costs were important.

Seventy-nine percent of respondents purchased a detached single-family home, 8 percent a condo, 6 percent a townhouse or rowhouse, and 7 percent some other kind of housing.  The typical home had three bedrooms and two bathrooms.

The biggest reason people buy a home is the simple desire to own a home of their own, cited by 30 percent of respondents, including 60 percent of first-time buyers.  The next biggest reasons for buying were desire for a larger home, cited by 11 percent of respondents; a job-related move, 9 percent; a Change in family situation, 8 percent; and the affordability of homes, 7 percent.

 "An interesting finding is that when asked about the reason for selling, 20 percent of FSBOs said they had been contacted directly by a buyer, up from 15 percent in the 2010 study," Bishop said.  "This is another indication of the tight inventory situation that is developing in various parts of the country, notably in the West."

The median transaction price for sellers who used an agent was $215,000, well above the $174,900 median for a home sold directly by an owner, but there were differences in the findings.  The median income of unassisted sellers was $80,400, in contrast with $97,600 for agent-assisted sellers.  Unassisted sellers were much more likely to be selling a smaller home, and they were more likely to be in an urban or central city area, all suggesting a lower home value.