Shift in home buyers

According to a recent survey of approximately 10,000 American households by the Demand Institute, more people (approximately 40 million) are spending greater than a third of their income on housing expenses (rent, mortgage, property taxes, utilities, and the like).

And of those surveyed, it seems people who rent are spending the most on housing. The survey reveals 49% of renters are spending more than 30% of their income on housing expenses. This is in contrast to home owners spending 26% of their income on housing.

But although home ownership has become more affordable, renters are still having difficulty in becoming homeowners. The Millennial generation is having the most trouble buying homes, because of a lack of well-paying jobs and continued tight credit policies by the banks. In Greenwich, it is because there is a shortage of homes under $1 million.

This shortage is compounded by downsizers and developers competing with new home buyers for properties at this price point.   

The National Association of Realtors recently reported that Americans 65 years of age and older are choosing to downsize to a smaller home instead of moving into rentals or senior centers.

People between 65 and 74 years of age represented 13% of all buyers, which is up 10% from a year ago. These Americans don’t want to deal with the risk of increasing monthly housing expenses. During the economic downturn, Americans over 65 represented 80% of homeowners. Americans under 35 years of age have decreased to 36% from 48% since the crisis, according to the Census Bureau.

In the Demand Institute study, 53% of renters want to purchase a home. Of those, 77%  believe homeownership is a prudent long-term investment.

Redfin reported that sales of homes priced at $1 million or more continued to do better than lower price points across the country for the third quarter.

The expensive housing market segment was the first to recover after the economic downturn due to the stock market, low interest rates and foreign investors. The luxury segment sales increased by 9% while the rest of the market decreased by 1.2% as compared to last year.

It is expected that international buyers in the luxury real estate market will be replaced by the traditional wealthy buyers as interest rates rise, and as the U.S. economy and dollar strengthens.

The Houston real estate market is doing exceptionally well, with a 42% increase in sales of homes in the over $1 million market segment because of a “strong and diverse” job market, according to Redfin. Job creation and job diversity combined with healthy wage growth fuel a sustainable economic growth.

Connecticut’s unemployment rate was 6.4% in October, which is unchanged from the September 2014 estimate but down from the October 2013 unemployment rate of 7.6%.

The unemployment rate has not been this low since six years ago, according to the Connecticut Department of Labor. So Connecticut is headed in the right direction.

Mary Ann Clark is a Realtor with Coldwell Banker at 189-191 Mason Street in Greenwich. Questions or comments may be emailed to [email protected]

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