It's a Seller's market! Houses are selling like crazy, and price increases are wild! But who is buying all the houses? And why are the housing markets all so hot?
One reason for the huge demand for homes is because of the housing shortage. New home builders have been cautious to avoid overbuilding as they did in 2006-2009. There were many unsold brand new homes waiting a long time for buyers. Homebuilders will not flood this market with unsold inventory. Additionally, the lending industry put much tighter restrictions on getting mortgage loans. New buyers needed better credit reports, higher incomes and the appraisal process increased their requirements making mortgage loans more difficult to receive.
Most of the buyers driving this market are 1) Millennials (aged 21-42 yrs.), 2) cash-rich investors and corporations, and 3) Baby Boomers looking to downsize their homes.
Millennials made up 43% of the buyers this past year. Many bought because they wanted a shelter but also because housing is considered a good store of value. Many Millennials wanted to get out of their rental homes.
Investors, both large and small, are buying homes. The stock markets have been doing well and many investors are retooling from stocks to real estate. Many large hedge fund companies are diversifying assets and moving into residential real estate. Mom and Pop landlords are tending to be selling right now.
Baby Boomers are aging and becoming empty nesters. All their children have grown up and moved out. They are looking to downsize the big family home into a more comfortable retirement house. Boomers (aged 57-75 yrs.) purchased about 29% of the homes.
Homebuyers were typically of White ethnicity (82%). Blacks made up 6% of the buyers and Asians were 6%, Hispanics 7%.
Two-thirds of the buyers were married and most were from two-income households. Single women made up 19% of the buyers while single men made up 9%.
Just over half of the buyers bought in the suburbs (51%), 21% bought in small towns and 12% moved to rural areas.
Baby Boomers were 42% of the Sellers in this market.