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REALTORS® reported that first-time homebuyers accounted for 32 percent of residential sales in 2016 (30 percent in 2015), according to the December 2016 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions.[1] Sustained job growth and improving incomes along with the aging of the Millennial generation are likely underpinning the continued, albeit modest, increase in homebuying by first-time buyers. [2],[3]
Low mortgage rates have also bolstered homebuying, although the increase in interest rates since November appears to have affected demand in some areas, according to survey respondents.[4] Mortgage rates are likely to continue to rise modestly in 2017.
Homebuyers who were renting prior to their recent home purchase accounted for 39 percent of sales in December 2016 (40 percent in November 2016; 38 percent in December 2015). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in November 2014 when this information started to be collected in the survey.[7]
[1]The author acknowledges Danielle Hale, Managing Director, Housing Research; Meredith Dunn, Research Communications Manager; and Amanda Riggs, Research Survey Analyst for their comments. Any errors are attributable to the author.
[2] First-time buyers accounted for 35 percent of all homebuyers based on data from NAR’s 2016 Profile of Home Buyers and Sellers (HBS), up from 32 percent in 2016. The HBS is a survey of primary residence homebuyers and does not capture investor purchases but does cover both existing and new home sales from July 2015 to June 2016. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.
[3] NAR’s 2016 Profile of Home Buyers and Sellers (HBS), the median age of first-time homebuyers was 32 years old.
[4] Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac. The average 30-year mortgage rate was 3.54 percent in the week of November 3, 2016. It broke above four percent, to 4.03 percent, in the week of November 23, and it climbed to 4.32 percent in the week of December 29. The average rate eased to 4.12 percent in the week of January 12, 2017, with rates likely to remain above four percent during 2017.
[5]The analysis is among states that have at least 500 observations.
[6] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence homebuyers, 28 percent were 18-34 years old. The HBS surveys primary residence homebuyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.
[7] NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house. The HBS surveys primary residence homebuyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.
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