2015 Home Buying Trend: Purchasing Larger Homes
Posted in Economist Commentaries, by Amanda Riggs on November 16, 2015
Home buyer demographics change slightly from year to year due to macroeconomic forces from the health of the economy to inflation to the global trade on oil prices. The National Association of REALTORS® recently released its 2015 Profile of Home Buyers and Sellersreport and there are some interesting new trends emerging this year.
One of the most fascinating is that in almost every region of the United States, we saw buyers trading up and buying bigger homes than last year. According to the new report, 42 percent of all buyers traded up in the size of their home, up from 40 percent in 2014. In the 2014 report, buyers reported that they were looking for homes similar in size at 31 percent compared to 29 percent in 2015. Regionally, the percentage of buyers looking for larger homes increased across the board.
One reason for this shift in purchasing power is that people finally have more equity from selling their previous homes in order to buy a bigger one. Since the housing downturn in 2010, many homes were worth less than their mortgages. Over the last several years, home prices have been rising. In 2014, 17 percent reported waiting or stalling to sell their home, which dropped to 13 percent in 2015. Sellers also reported that they sold their homes for a median of $40,000 more than they purchased it, up from $30,100 in 2014. The most common reason for selling a home in 2015 was that the home was too small at 16 percent.
The typical seller in 2015 was 54 years old (same as last year) and the median household income was $104,000, up from $96,700 in 2014. Buyers aged 35 to 44 years, or Generation X, was the second largest age group to purchase homes last year at 20 percent, behind Millennials 34 years or young where 28 percent purchased homes. We can speculate that Generation X-ers probably had a child in the last few years and wanted a bigger home to expand their family. Finally, we see the trend where repeat buyers have been able to sell their homes at a higher price in order to trade up and purchase larger homes.