As the housing market proceeds with its many transitions and the economy continues to make gradual strides, it's becoming apparent that the nature of household formation has changed for good.
The U.S. population keeps growing, prompting concerns that the current level of housing inventory will be inadequate in supporting demand, resulting in property value appreciation rates that box out many traditional buyers. And if a recent survey from real estate franchisor Century 21 is any indication, those would-be single-family buyers will also be facing increasingly steep competition from an emerging population: the single buyers.
Shifting dynamics, new priorities
Data from the National Association of Realtors revealed nearly one-third - 32 percent - of all purchases made in 2013 were by a single buyer. Single-person households represented just 23 percent of the market share, compared with 17 percent in 1970. It's a phenomenon due in part to post-recession qualification standards for mortgage approval, but also to the fact that people are getting married later - if at all - and living by themselves longer. For many of today's adults, marriage is not necessarily prioritized ahead of a home purchase, and as the survey found, single buyers tend to be of the ambitious, serious-about-their-investments sort.
"We are in the midst of a shift in the homebuying population," said Rick Davidson, Century 21 Real Estate LLC's president and chief executive officer. "This survey shows that homeownership is a major life decision for singles, and that is just as important a part of the American Dream for singles as it is for married couples. Real change, innovation and market growth stems from understanding consumers' drive, motivation and sentiment, and how these can shift from person to person."
Davidson added that the job of a company like Century 21 is to understand the priorities and desires of today's buyers and attempt to meet them. In many cases, single buyers are investors, either using real estate as a long-term financial vehicle or individually representing the broader interests of a larger entity.
The more "traditional" single buyer, meanwhile, is typically a prudent spender, willing to make sacrifices that help achieve his or her financial goals. Sixty percent of single homeowners, for example, said they would dine out less frequently in order to purchase a home, while 54 percent agreed that they would cut back on entertainment and 51 percent would spend less toward vacations. The most important physical attributes of a home for surveyed single buyers were space and square footage (referenced by 59 percent of respondents), a yard (57 percent), and proximity to work or school (47 percent). Many respondents also cited various elements of the buying process as "very intimidating" or "extremely intimidating" - perhaps as a result of going it alone. The most frequently referenced were:
- Making an offer and/or negotiating the sale price (38 percent)
- Obtaining a mortgage loan (36 percent)
- Moving (31 percent)
- Closing (30 percent)
- Searching for/locating a new home (25 percent)
A generation divided
While the Century 21 survey highlighted a segment of the homebuying population that is vital to the market's growth, there's also a significant cross-section of younger adults who are driving up prices in the rental market. With mortgage credit approval harder to come by than it was prior to the recession, the number of millennials renting apartments still greatly exceeds the portion of that demographic owning homes.
A recent Wall Street Journal piece noted
increased construction sector activity during July was largely focused on the multifamily sector, with swelling rental demand helping push apartment-building rates to a 25-year high. So, while single buyers may be a more viable presence in the buyers market going forward, more younger adults still need to meet qualification standards in order for balanced demand to be achieved.