Full House: Pandemic buyers want room for multi-generations

It’s only been eight months, but the coronavirus pandemic has already drastically altered homebuyer behavior and choices, according to a new report from the National Association of Realtors.

Among the findings in NAR’s recent Profile of Home Buyers and Sellers report, buyers who completed their transaction after the pandemic began in March were more likely to purchase a multi-generational home.

The U.S. Census Bureau defines multigenerational families as those consisting of more than two generations living under the same roof. Many researchers also include households with a grandparent and at least one other generation.

Multigenerational home purchases accounted for 15% of sales after March, versus 11% before.

In addition, buyers who purchased after March (when the pandemic began) were more likely to relocate to the suburbs and were more likely to pay more for that home – regardless of its location – paying an average of $339,400 compared to $270,000 for those who purchased before April.

Not surprisingly, this group also had higher household incomes – $100,800 compared to $94,400 for pre-pandemic buyers.

Among NAR’s findings, those who bought a home during the pandemic are expected to remain there for 10 years. That is compared to 15 years for those who purchased prior to the COVID-19 outbreak.

“The coronavirus without a doubt led home buyers to reassess their housing situations and even reconsider home sizes and destinations,” said NAR Vice President of Demographics and Behavioral Insights Jessica Lautz in the report.

“Buyers sought housing with more rooms, more square footage and more yard space, as they may have desired a home office or home gym,” she added. “They also shopped for larger homes because extra space would allow households to better accommodate older adult relatives or young adults that are now living within the residence.”

The survey also evaluated seller behavior prior to and after the pandemic began.

Like buyers, pandemic sellers cited a desire to be close to family and friends as the top reason to sell, especially among those moving large distances.

Another takeaway was the sense of urgency sellers were feeling. Owners who sold in 2020 were more likely to say that their need to sell was “at least somewhat urgent.” Those who closed in April or later were more likely to sell because their home was too small – 18% compared to 13% of those before April.

“So many sellers were eager to get out of their old home and move to something bigger that would better meet their needs during quarantine,” Lautz said.

With lockdowns in place, sellers who sold after March were more likely to use technology as a marketing tool. They were also more likely to use virtual tours — 27% after March compared to 16% pre-pandemic.  

Pandemic buyers turned to technology as well: 97% of pandemic buyers searched for their homes online, up from 93% a year ago. The time spent looking for a home declined to eight weeks from 10, the shortest search since 2007.

“Some buyers purchased their homes before ever physically seeing them in person,” said Lautz. “They researched, viewed photos online and did virtual tours from their computers and phones, and ultimately made an offer through their agent.”

According to the report, 88% percent of pandemic buyers reported using an agent to purchase their home, a near historical high. More than half of buyers found their agent through a referral or said they had used the agent in the past.

“We are all in unknown territory with this pandemic, so it’s no surprise that more buyers than ever turned to agents to help them navigate through some of the uncertainties and one of the most complex, competitive markets any of us have ever seen,” said NAR President Vince Malta in the report.

Homeownership is increasing during the COVID-19 recession: Here’s why

The Great Recession turned America into a nation of renters, but the COVID-19 Recession is moving the pendulum firmly back towards homeownership.

Prior to the COVID-19 pandemic, if you asked the average American where they fell on the rent-or-buy decision, you might hear a lot of solid reasons for renting.

Millennials — also known as the job-hopping generation — might have said they value the flexibility and freedom of a year-long lease. Gen Xers, a group hit hard by the Great Recession, viewed renting as more affordable. According to a 2018 Freddie Mac study, 31% of Gen Xers who were renting said they did not anticipate buying a home in the future.

While baby boomers have greater wealth than younger generations, they also have more divorce — ‘gray divorce’ more than doubled in 2017, leading many boomers to swap the family home for a sleek urban apartment in a luxury rental building.

Challenging the previous bias toward homeownership, in 2017 more U.S. households were renting than at any point in the last 50 years, according to a Pew Research Center study. Initially a byproduct of the housing crisis that drove the Great Recession, almost a quarter of the 100 largest U.S. cities changed from homeowner- to renter-majority between 2006 and 2016.

But even among those who could afford to buy a home, renting became popular, and a new breed of high-income renters began to emerge in metropolitan areas across the country.

But almost overnight, that demand has shifted, and renting — especially in luxury high-rise rental buildings with shared amenities —has started to lose its luster. Health concerns, social unrest and lockdowns have made the idea of downtown luxury rental living less attractive and seemingly more expensive.

The data is increasingly clear: The coronavirus pandemic has effectively moved the rent-versus-buy decision back toward homeownership.

According to a July report from the National Association of Realtors, homeownership rates across the country increased during the pandemic — up to 67.9% in the second quarter from 64.1% a year ago— as Americans rushed to take advantage of low interest rates and opt out of renting. Millennials aged 35 to 44 saw the highest gains in homeownership, increasing 4.9 percentage points to 64.3%.

As a result, existing-home sales rose to new heights in September, climbing 20.9% from a year earlier, marking the fourth consecutive month of increases.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said NAR chief economist Lawrence Yun in a press release. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

Not everyone is looking to migrate to a warmer climate — for many, the decision to buy is being driven by a need for more space to accommodate home offices, distance learning and lives increasingly led at home.

“The big trend right now is people are moving to the suburbs to get more space, although another set of buyers swapping out their condos for single-family homes,” said Compass Agent Michael Giliano. “Overall, buyers are looking for a real office, sometimes two dedicated offices, so their worlds are not colliding. If they have kids, they also need space for them to do their schoolwork, play and go outside.”

According to Giliano, having room to work away from other household activities helps families control their stress and maintain a sense of normalcy as they learn to live with the pandemic.

While making a major financial decision like buying a house might seem risky during these uncertain times, owning a tangible asset like a home is considered less volatile and safer than investing in the stock market.

In a recent marketplace.org article, Wharton School real estate finance professor Susan Wachter called homeownership “a piggy bank like none other at this moment in time.”

The latest Home Equity Report from global analytics firm CoreLogic bears that out, as homeowners’ balance sheets continue to be bolstered by home price appreciation. In the second quarter of 2020, American homeowners saw their equity rise by an average of 6.6% from the previous year.

While owning a home means committing to staying in one place for a while, pandemic lockdowns and travel bans have made that sound appealing.

According to First American chief economist Mark Fleming, being confined indoors has given us a new realization about the significance of owning a roof over our heads during uncertain times.

“As we navigate the unprecedented impact of COVID-19, ‘home’ has taken on added significance and there are signs that homeownership remains one of the main tenants of the American Dream,” Fleming said.