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Answering all those burning questions you didn’t know you had about home ownership.

Home Buyers Over Time

Jessica Dabkowski

Helping you with all things homeownership!

Let’s do some time traveling and look back at home buyers over time. There has been an overwhelming amount of chatter on the U.S. housing market in the last year. I thought a few articles on the market as we head into spring would be interesting and insightful.

What better way to start off than by looking at the profile of who was buying in 2021? Today, we’re specifically looking at the profile of buyers for 2021 and as a special treat, we’re able to compare it to the stats of 40 years ago.

Profile of Home Buyers and Sellers

Every year, the National Association of Realtors (NAR) publishes a “Profile of Home Buyers and Sellers” for the previous year. I am a member of NAR, so I figured I better dig in and use this data so I get the most of those monthly tithes (fine, DUES) they charge me to be a member in good standing.

This year, NAR put together a side by side comparison of 40 years: 1981 vs. 2021. Guys, I have to tell you, these numbers speak for themselves. The 2021 data was collected from buyers who purchased between July 2020 and June 2021. This report is also the first full-year report post-pandemic.

Unless specifically linked to a different source, all the statistics used for this article were provided by NAR and can be accessed in full HERE.

If you stick with me through the end of this article, I am going to drop a statistic that will absolute BLOW YOUR MIND. With that tantalizing promise, let’s dig in.

First-Time Buyers Got Older

In 1981, the median age of the first-time buyer was 29. In 2021, the median age was 33. This makes sense to me.

We go to school longer now. Student debt follows us everywhere (average of $37,062).

We pay 29.96% of our income each month on rent. Rent prices have increased an average of 8.86% per year since 1980. I don’t know about you, but when I was a 9-5er, I wasn’t getting a 8% raise each year. In Michigan, the average rent is $908/month.

Less Money Down

Probably as a result of the above-mentioned factors, the typical down payment dropped quite a bit. In 1981, buyers typically put down 20% vs. the 13% they put down in 2021.

For 2021, NAR broke this statistic down further between first-time and repeat buyers. First time buyers typically put down 7%. Repeat buyers typical down payment was 17%.

Now, the proliferation of lenders and programs becoming available in the last 20 years may have had an impact on these numbers. Federal programs like FHA loans allow buyers to put down as little as 3.5% as a down payment. VA loans may require no money down, and 17% of buyers were veterans or active-duty service members in 2021.

In conventional loan products, putting down less than 20% comes at a cost as you’ll have to pay Private Mortgage Insurance (PMI) to cover your lender’s risk of loaning you more than 80% of the home’s appraised value.

Whether the differential in the statistics on down payments are good or bad, I can’t say. But the 2021 number dispels the myth that “I need to save 20% for the down payment on a new home.” The numbers tell us that is not true. Most people who finance are not putting down 20%.

Still Using the Good Ole Mortgage

For all the exhortations that “cash is king”, most buyers are still using a mortgage to purchase their home. In 1981, 93% financed their home purchase. In 2021, 87% financed their home purchase.

It especially makes sense in light of current low mortgage rates. If you can secure a mortgage for 3-4%, you can leverage the money your aren’t putting into your house to work harder for you by putting it into the stock market or other life goals.

Even people who have that kind of cash funding available to them are generally using a mortgage. Remember our friend Lindsay Corneille’s article?

We Search Differently

In 2021, 95% of buyers used the internet to search for a home. In 1981, that number was – you guessed it! – ZERO.

In 1981, 22% of buyers used the newspaper to search, and get this, in 2021, 7% of buyers used a newspaper to search. I will straight up admit that when I was buying my home, I never in a million years would have thought to check the newspaper.

Our Marital Status Has Shifted

In 1981, married couples were almost three-quarters of buyers (73%). In 2021, that number dropped to 60%. There are probably a few reasons for this change. Undeniably, society as a whole focuses less on the nuclear family. Couples get married later. More people are divorced as a percentage of the population. And, as you’ll see below, people aren’t saving themselves for marriage anymore. (Yeah, I went there. I was laughing before I even had the sentence typed.)

The biggest gain was ALL THE SINGLE LADIES (cue the Beyonce). Singles ladies jumped from 11% of buyers in 1981 to 19% in 2021. Single men, dropped 1%, going from 10% of all buyers in 1981 to 9% in 2021. Unmarried couples make a little jump from 6% in 1981 to 9% in 2021.

For those of you who are doing the math in your head, those stats do not add up to 100% so I’m not sure where that other sliver went but I can guess they just got lazy and didn’t check a box on that survey question.

Repeat Buyers: I. JUST. CANNOT.

Okay, here is the statistic that absolutely made my jaw drop. I read this statistic 4-5 times before I was sure I was reading it correctly.

In 1981, the average age of the repeat buyer was 36. Makes sense. You graduate from high school or college, get married, buy your starter home, have those 2.5 kids and promptly realize that starter home is overflowing with people and stuff and you want to move.

Now here’s where the stat goes off the rails. In 2021, the average age of a repeat buyer was 56. Yes, you read that correctly. The average repeat home buyer was fifty-six years old in 2021. NAR cites this number as an all-time high.

After sitting with the data and doing some research, here are some theories I compiled to explain that statistic.

Boomers are living in their home for longer periods of time (either by choice or to wait out the damage wrought by the housing crash). Those buyers are now ready and able to move on. This theory is supported by the concept of adult children “boomeranging” back into the nest, causing parents to put off downsizing.
People are working longer and aren’t discomfited by the thought of taking on a mortgage past the traditional retirement age.
Low interest rates are a carrot to cash out equity in a current home and purchase a new home. Equity rates have risen substantially in recent years and repeat buyers are using that equity to get into the home they want.
Not surprisingly, of those buyers who do use cash (remember my “cash is king” comment?), they are likely to be older, established buyers. Cash is giving older buyers the edge to win bidding wars, often beating out younger buyers for homes.
As I noted above, younger buyers are struggling to enter the market, either because of student debt, difficulty saving for a down payment or other reasons.