In a rapidly changing real estate landscape, many agents wish they were telepathic and could read consumers’ minds. But the next best thing might be Zillow’s 2018 Consumer Trends Report, released Thursday.
The 181-page report provides insight into the changing wants and needs of buyers, sellers, renters, and homeowners as they grapple with low inventory, record-high home and rental prices, and steadily rising interest and mortgage rates.
Here are five of some of the most interesting facts revealed in the report:
1. Are starter homes a thing of the past?
There may be a new explanation for this: Zillow says that first-time buyers and repeat buyers purchase similar homes in terms of price ($230,000 versus $242,000), the number of bedrooms (3), square footage (2,000), and type (single-family detached still rules).
If first-time buyers are competing directly with repeat buyers (who often have more equity or funds) they may lose out. Also, first-time buyers may be aiming too high with their wants.
The report notes first-time buyers may be searching for larger homes in order to have room for kids or roommates, and repeat buyers, who tend to be older, may begin favoring lower-priced listings as they downsize.
2. Latinos are disproportionately impacted by affordability issues
According to Zillow’s survey results, 43 percent of buyers over the past year considered renting while searching while searching for a new home — a result of the 78 consecutive months of annual median home price growth.
Latino buyers were the most likely to consider renting instead of buying (63 percent), which Zillow says is the result of the high concentration of Latino communities in the West, a region that has led the way in home price growth. In the latest Case-Shiller report, Las Vegas, Seattle, and San Francisco reported the highest year-over-year gains of 13.7 percent, 12.1 percent, and 10.8 percent, respectively.
3. Millennials are heavily involved in the selling process
Eighty-four percent of all sellers said they rely on agents to provide guidance from the beginning to the end of the transaction, but millennials are the most likely to take on a DIY approach to some of the tasks associated with the selling process.
Twenty-three percent of millennials promote their homes on real estate sites, 33 percent of them hire home inspectors, and 32 percent are involved in photographing their home. Meanwhile, only 6 percent of Baby Boomers promote their homes on real estate sites, 14 percent of them hire home inspectors, and 11 percent are involved in photographing their home.
4. Homeowners are saying no to rental opportunities
A whopping 96 percent of homeowners said they don’t rent out their homes and don’t intend to. For the four percent of homeowners who have decided to participate in the rental market, 81 percent have or plan to turn their home into a long-term rental. Nineteen percent said they’ll list their home on a short-term rental site such as VRBO or Airbnb.
Although the majority of homeowners in this year’s survey said no to becoming landlords, Zillow expects that trend to change over the upcoming years as buyers are more open to the idea. Twenty-four percent of current homebuyers said it’s “very or extremely important” that they have the opportunity to rent out a portion of their home, and another 27 percent said they’d like to rent out the entire property.
5. Issues with rental affordability may push renters toward homeownership
Despite slowing rent growth, renters are spending 29 percent of their monthly income on rent — 1 percentage point away from the maximum recommended amount (30 percent). That leaves renters in a financial bind with only 52 percent of them being able to handle an unexpected expense of $1,000.
A rent hike of at least $125 per month often prompted renters to move, and 46 percent of those renters considered buying a home because of concerns about their ability to afford rent hikes (48 percent), the desire to become a homeowner (48 percent), and the need for more control over their living situation (41 percent).