Millennials are beginning to settle down, start families and seek more space—knowing it won't come cheap. A new Realtor.com survey suggests shifting priorities among first-time homebuyers who are increasingly looking for flex space such as finished basements, guest rooms, and guest houses. These home shoppers have also increased their budgets since spring and are more willing to bid over asking prices and use other strategies to stay ahead of the competition.
Realtor.com and HarrisX surveyed first-time homebuyers in spring 2021 and again in fall to understand how their priorities have shifted in a competitive housing market. The survey found that while more than a quarter of hopeful first-time homebuyers were unsuccessful at purchasing a home in 2021, 72% are aiming to buy in 2022. And after months of trying, home shoppers have a better understanding of what it will take to write a winning offer.
"Despite a challenging year, aspiring first-time homebuyers are surprisingly optimistic about 2022," said George Ratiu, Manager of Economic Research, Realtor.com. "They're looking at the new year as a fresh opportunity to make their dreams of owning a home come true and our survey suggests that they're armed with information and ready to compete for their first home."
Home sales are expected to hit their highest level in 16 years in 2022 according to the Realtor.com 2022 Housing Market Forecast. In this fast-paced, competitive market there are a number of tactics that buyers can use to get ahead such as checking online listings every day, putting more than 20% down and making an offer quickly.
In the spring, 79% of first-time homebuyers were planning to use these tactics to win a home, but that number jumped to 91% in the fall, indicating that buyers know what it takes to win.
First-time homebuyers have also become more willing to offer over asking price. In the spring 39% said they would not pay over asking, but that number fell to 24% in the fall.
In the fall, three percent of first-time buyers were willing to offer 30% over asking (in the spring, no respondents selected this option), which equates to more than $110,000 on a typical home--a significant premium.
With the median home price in the U.S. hitting $380,000, many first-time homebuyers found that they needed to up their budget to land a home.
In the spring, 75% of first-time shoppers were looking for a home at or below $350,000, but that number fell to 62% by the fall, as budgets increased.
While those shopping in the $350,000 to $500,000 range held relatively steady, the number of first-time shoppers in the $500,000 to $750,000 range doubled, jumping from 6% in the spring to 13% in the fall.
During and throughout the pandemic, many people moved from cities to suburbs to find more space and affordability. Data shows that in 2022, survey respondents are planning to stay closer to their current location.
Some data showed:
- First-time homebuyers planning to stay in their current city or town increased from 40% in the spring to 47% in the fall.
- Those planning to move to a different city or town within their state decreased from 42% in the spring to 36% in the fall.
- Those planning to move to a different state held relatively steady at 17% in the spring and 16% in the fall.
"Our survey data suggests that many people have found the location they'd like to settle down in and are now focused on landing the right home. And with more homes expected to hit the market in the coming months, there should be plenty of opportunities for prepared buyers to find their dream home," said Ratiu.