A study of the profile of US property buyers in 2016 revealed an increase in first-time purchases and an overwhelming preference for single family homes. It also showed a market still much in favour of the seller.
The annual National Association of Realtors (NAR) profile of home buyers and sellers in the US provides a snapshot of the market in the country as a whole. After a year of rising prices across the board, low supply and falling homeownership, it’s no surprise to read in the survey that the US property market continues to lie on the side of the seller rather than the buyer.
First-time buyers in the US market
The number of US property buyers purchasing a home for the first time in their life reached 35.2 per cent in 2016. While this figure is three points higher than the previous year (the lowest on record), it still lies considerably below the historic average of 40 per cent. The average age of a first-time buyer rose to 32, the highest since 2006.
Analysts attribute the low percentage of first-time buyers and their delayed entry in the market to several factors. For Lawrence Yun, Chief Economist at NAR, the reasons are three-fold: the lack of affordable new and existing inventory, home prices in many markets rising far above wages and difficulty saving for a down payment because of rising rents and student debt.
Typical buyer profile
In the country as a whole, US property buyers have an average age of 44 and a median income of US$88,500. The vast majority of recent buyers (66 per cent) are married couples and their principal motive for buying is the desire to own a home of their own.
Most buyers use finance to purchase and the NAR survey found that cash purchases continued to drop. 88 per cent of buyers in 2016 had mortgages for 90 per cent of the property value, while in the case of first-time buyers, the percentage financed rose to 96 per cent of the value.
Typical types of property
US property buyers overwhelmingly favoured resale homes in 2016. Just 14 per cent purchased a new property, a statistic that reflects the lack of new builds on the American market. In a survey published in September, NAR reported that ‘”single-family home construction is startlingly underperforming in most of the US”.
Single-family homes were the preferred option for American buyers in 2016. 83 per cent of recent buyers opted for this type of property, while just 7 per cent bought an apartment or townhouse property. The median price was US$227,700 for a home whose average characteristics were floor space of 1,900 square feet, three bedrooms and 2 bathrooms.
US property buyers increasingly turn to the internet to search for a home. In 2016, 44 per cent of buyers did their research online, although the majority still used the services of a real estate agent. On average, buyers took ten weeks to find a property and looked at a total of ten homes.
This relatively long period of time reflects the lack of choice on the market and one of the main challenges facing buyers in the US in 2016 was the low level of inventory. Also in favour of the seller was the revelation that the median price for US properties in 2016 was 98 per cent of the asking price.
“On balance, the market in 2016 was definitely one in favour of the seller with the buyer facing obstacles such as limited choice of available properties and rising prices,” says Dies Poppeliers, Managing Director at BRIC Group. “However, this market balance works in favour of buy-to-let investment since many would-be homeowners are forced to rent. While construction of new builds remains low, we expect this situation to continue at least for the short term.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
(Source: National Association of Realtors)