Buyers trending older, with more cash
With each home purchase, the portrait of the typical 2023 buyer came into tighter focus. Income levels, other demographics, sale prices, all had an impact, but low housing inventory and higher interest rates were the primary influences, favoring older buyers with deep pockets.
“There’s a couple of ways … that I think that the 2023 market looked a little different,” said Lisa Sturtevant, chief economist of Bright MLS, a mid-Atlantic-area multiple listing service. “It has been a very unusual time for the housing market over the last few years.”
Cash buyers showed their clout, nationwide and in the D.C. region, Sturtevant said. Nearly 30 percent of buyers purchased a home without outside financing, up from 13 percent in 2021, said Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors (NAR). In September, 34.1 percent of sales nationally were cash transactions, the highest monthly share in nearly a decade, according to the Redfin real estate company.
Cash buyers enter the market with a head start and immunity to higher interest rates. The buying process, without involving lenders, moves quickly and makes their bids more attractive to sellers.
Buyers in 2023 were generally more affluent. According to the NAR profile, the typical U.S. home buyer reported an annual household income of $107,000, up from $88,000 in 2022. Down payments were at high levels as well, averaging 19 percent for repeat buyers and 9 percent for first-timers.
“As interest rates rose, people weren’t able to get those super-low 3 percent mortgage rates,” Sturtevant said. “We saw more cash buyers in the market. And a lot of the cash [sales] in our market are fueled by people who are cashing in on equity of an existing home.”
The typical buyer also trended older. At 58 and 35 years old, the median ages of repeat and first-time U.S. buyers, respectively, are the second oldest in the four decades that the NAR has collected buyer age data.
Repeat buyers are “more likely to be retiring, more likely to be baby boomers, and they’re active in the housing market,” Lautz said. “[The] median age for first-time home buyers [is] likely to be older too, because they have headwinds like student loan debt, credit cards, car loans and higher rent that is stalling them from being able to save for a home.”
The NAR report also noted the impact of single women on the market. When the NAR began collecting marriage data in 1981, single women were 11 percent of the buyers, with single men at 10 percent. In 2023, single women accounted for 19 percent of sales, or almost 1 in 5, and double the rate of single men.
“It’s pretty impressive,” Lautz said, “because they were outperforming men at a time when it was actually difficult and newly recent for them to even get a credit card.” Single women, she said, have become a “powerhouse,” second only to married couples as home buyers.
“It’s the value that single women do place on homeownership. I don’t think that’s going anywhere,” she said. “I think that they want stability. They want to know what their monthly housing cost is.”
The data-rich real estate industry also provides a clear picture of those struggling to enter the market. It’s difficult for younger, less affluent buyers, but the data set also contains insights for those trying to break through.
“We saw creativity, particularly among first-time home buyers, as being a characteristic of the 2023 market,” Sturtevant said. These buyers, she said, might have looked at neighborhoods or housing types that they wouldn’t have considered in different circumstances. They might even have looked at homes with a rental stream such as provided by a room to rent over Airbnb or the other unit in a duplex.
“And then,” she said, “we also saw more folks, young buyers, first-time buyers, receiving down payment assistance from their parents, who frankly have a lot of equity in their homes and were able to use some of that to help their adult children buy a home.”
For some young buyers, staying in the family home for a while provided a financial edge.
“And our data shows that there is an elevated share who are moving from [the family home directly] into homeownership,” Lautz said. Not having to pay rent and being able to pay down student loan debt and otherwise improve their debt-to-income ratio seems to have smoothed the path to homeownership.
Industry leaders advise potential buyers to be prepared to act quickly as most homes sell quickly once they hit the market. Working with a knowledgeable agent and avoiding shortcuts such as waiving inspections will pay off in the long run, they say.
“The buyers are like, ‘Hey, we’ve got to get ahead of the market and find houses that are … not waiting for Zillow or realtor.com,’” said Creig Northrop of Northrop Realty in Clarksville, Md. “You’ve got to get with the top Realtors and get ahead of the time.”
Industry experts say major changes in the market won’t come until interest rates drop and inventory rises. But some see signs of hope.
The U.S. average housing price, which peaked at $552,600 in the fourth quarter of 2022, ended 2023 at $492,300. The average rate on a fixed-rate 30-year mortgage, which pushed toward 8 percent last fall, had dropped more than a point by the end of the year. Further drops could spur potential sellers sitting on low-interest home loans to jump into the market.
“Where do rates need to go … to sort of loosen up the inventory log jam?” Sturtevant asked. “I honestly don’t think they have to go as low as maybe people think. I think we’re going to find in 2024 that this year really starts to become the year of life happens.”
Many potential sellers are home-owning baby boomers with an urge to downsize that is thwarted by interest rates much higher than the 2 to 3 percent they’re sitting on now, Northrop said. But rates have been moving in the right direction, he said, from 8 percent to 6 percent. If rates drop to about 5 percent, he said, “all the sellers that are sitting on the 3 percent interest rates will want to move.” And Northrop expects an election-year decrease in rates.
Sturtevant is more cautious. She expects mortgage rates to stay above 6 percent for most of 2024. “And I think this is sort of the new normal for rates,” she said.
“We shouldn’t expect mortgage rates to go back down to 3 percent, frankly, in our lifetime,” Sturtevant said, “unless there’s some other, heaven forbid, some other global pandemic or terrible economic crisis.”
Related Content
Biden aims to strike careful balance as college protests spread
AI deepfakes threaten to upend global elections. No one can stop them.
