Demographics of a First-Time New Home Buyer in ’21 vs. ’80

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Heather Jones
Heather Jones
I'm Heather, an author passionate about home improvements. My writing is your guide to making homes better. Let's explore easy ways to enhance your living spaces, from small fixes to exciting projects. Join me on a journey of making your house a cozy and stylish haven.

The housing market in 2021 is in unusual territory. In many cities around the country, houses are spending a record low amount of time on the market, often with bidding wars and purchases sight-unseen.

With home equity at such apex, seasoned buyers and current homeowners have the resources to draw upon as they upgrade or downsize their homes. But what about first-time new home buyers in 2021 – are they destined to be left behind in the current supply-restricted housing boom?

What it Used to Be Like Versus Now

Here, we take a brief glimpse back in time to compare first-time home buyers and the market forces at play in the current 2021 housing market to that of 41 years ago, in 1980.

One major influence for new home buyers are the current very low interest rates, which are currently hovering around 3%.

Suddenly, a dream that was previously out of reach for many renters can now be a reality. Furthermore, many lenders have modified requirements for some loans, and are eager to lend to qualified buyers.

These low interest rates have influenced a shift in demographics, with millennials representing a larger share of first-time homebuyers.

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In contrast, late 1980 witnessed a tightening of the money supply, with interest rates subsequently rising to an all time-high of 18.45% by 1981.

The resulting recession affected homeownership rates to drop from 65.5% in 1980 to 63.8% in 1989.

The average American household had just 62% of the income required to qualify for a mortgage to purchase a median-priced home. Most Americans were priced out of the housing market, and home sales dropped for many years.

 Record-Low Interest Rates

Galvanized by the current record-low mortgage rates, millennials who are now aging into the home-buying stage are looking for more space.

Until recently, or the last few years, many millennials who had been able to remain employed were living the traditional post-collegiate life in closet-sided rentals in trendy cultural districts within expensive metropolitan areas.

Higher purchasing power has driven these millennials to seek more space in more affordable cities and suburbs, unintentionally driving down their share of affordable homes. 

‘21 Stats, A Pandemic Changes Things

Recent news suggests that this may change, as millennials voice concerns about their recent home purchase – 21% say they regret high maintenance costs and 15% regret their location. Despite those two stats, overall, the statistics reported on Millennials who snapped up homes in the hot real-estate market reveal their biggest regrets, from unexpected costs to high mortgage payments” tell me most homebuyers are happy, even though the title paints a different picture. 

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Nationally, market conditions still favor sellers, even though the costs of homes are increasing. But some markets are slowing and in those markets smart builders have already made  moves to ensure they stay competitive in local markets. In Minneapolis, LGI Homes, for example, acquired KenRoe in Minneapolis, immediately giving them more inventory now while supply is low, and much more in the mid-term, which adds lots to their pipeline, their specialty. of delivering move-in ready high-quality homes at an affordable price. 

First-time Home Buyers are Older, More Diverse

The average age of a first-time home buyer is 33. In contrast, first-time homebuyers in 1980 were slightly younger, at 29.6. 

In 2020, the latest year for compiled buyer and seller trends by the National Association of Realtor’s Research Group, 61% of recent buyers were married couples. In contrast, 52% of first-time home buyers were reportedly married in the 1980s.

In 2020, 17% were single females, 9% were single males, and 9% were unmarried couples.

35% of all buyers had children under the age of 18 living at home.

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61% of buyers between 30 and 39 years had at least one child under the age of 18 residing in the home.

The most racially diverse group of buyers was the 40 to 54 age group. 21% of this group of buyers identified as Hispanic / Latino, Black / African American, or Asian / Pacific Islander, in contrast to 17.8% of buyers in the early 1980s. 

What About Covid?

It would be remiss to overlook the enormous impact of the pandemic on first-time new home buyers. In 2021, with a light at the end of the pandemic tunnel in view, pent-up demand is causing a surge in home-buying activity.

In many parts of the country, corporate relocations were put on hold in 2020. Now, however, states are loosening their border and quarantine restrictions, and those who held off on relocation due to Covid-19 restrictions are now feeling more at ease with a relocation.

Meanwhile, between 1978 and 1981, people were staying put in their communities. New and existing home sales fell by 50% under the weight of the skyrocketing interest rates.

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One enormous drive for a changing demographic in the housing market has been the internet. The digital marketing transformation between 1980 and 2021 has enabled marketing to a more global demographic.

In 1980, the internet was not yet a tool in the homebuyer’s arsenal, and all home sales relied strictly on real estate agents or brokers as a top resource.

The emergence of 3D virtual tours was not just a welcome safe alternative to live showings during the pandemic, but they also enabled access to a greater global diversity of buyers as compared to 1980.

Despite the housing crunch, the internet has leveled the playing field and helped all with access gain a foothold in today’s housing market.

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