Repeat buyers boost national housing market in '98.
These are some of the findings of Chicago Tide Corporation's (NYSE: CTZ) 23rd annual survey, "Who's Buying Homes in America."
"Consumer confidence levels were at an all-time high last year. With the exception of a brief downturn in the market that occurred after the peak summer-buying season, the economic environment was extremely positive for home buyers," said John Rau, president and CEO of Chicago Title. "These factors, combined with interest rates that were lower than we've seen for 30 years, made for a very favorable home-buying market in 1998."
Since 1976, Chicago Title has conducted the survey to identify and track the home-buying behaviors of consumers in major U.S. metropolitan markets. This year, the survey polled a representative sample of recent home buyers in 20 markets: Atlanta, Boston, Chicago, Cleveland, Dallas-Fort Worth, Denver, Detroit, Houston, Los Angeles, Memphis, Miami, Minneapolis-St. Paul, New York City, Orange County, CA, Orlando, FL, Philadelphia, Phoenix, San Francisco, Seattle-Tacoma, and Washington, D.C.
According to the survey, the median home price in the 20 markets surveyed rose 5.1 percent to $167,900 in 1998 from $159,700 in 1997. The average home price, however, outpaced the median, rising 8.2 percent to $208,000 from $192,300 in 1997. This jump can be attributed to the trend among repeat home buyers to purchase much more expensive homes.
Among repeat buyers, the median purchase price rose 6.2 percent to $189,800 from $178,700 in 1997. The average home price for repeat buyers grew even more substantially, rising 9.7 percent to $244,300 from $222,700 in 1997. For 1998 first-time home buyers, the median price rose 5 percent from the previous year to $142,200, and the average home price grew 4.8 percent to $165,400.
The survey found that home buyers generally had higher incomes, but applied less toward their initial down payment and accepted higher monthly payments. This was particularly evident in the repeat buyer population, which constituted 53.8 percent of home buyers, while first-time buyers fell back slightly to 46.2 percent of those surveyed in 1998.
Nearly 80 percent of home buyers in the markets surveyed chose a fixed-rate mortgage - an increase of 10.1 percentage points from the previous year. "Home buyers were anxious to take advantage of the decreasing interest rates and lock in mortgages at favorable rates," explained John Pfister, who directs Chicago Title's marketing research effort.
Among the survey's other findings were:
* Taken as a percentage of the sales price, the average down payment dropped to 19.3 percent from 20.3 percent for all home buyers surveyed. First-time buyers reduced their down payments to 12.8 percent from 13.7 percent, while repeat buyers' down payments decreased to 24.9 percent of the purchase price from 26.1 percent in 1997.
* The average monthly payment rose in 1998 to $1,212, an 8.8 percent increase from $1,114 in 1997. First-time buyers made 4.8 percent higher monthly payments ($1,069) than their 1997 counterparts ($1,020). But the big leap was among repeat buyers, who paid 12.2 percent more per month - an average of $1,343 compared with $1,197 in 1997.
These increases in monthly payments, however, didn't take a bigger chunk out of home buyers' after-tax income: 32.3 percent in 1998 compared with 32.8 percent in 1997. The reason for this trend is that household income among all surveyed home buyers rose 6.8 percent in 1998 to $70,600 from $66,100 in 1997. First-time home buyers reported household incomes averaging $57,200 - up 6.3 percent from 1997 ($53,800). There was also a marked increase in the household income of repeat buyers, which was up 6.6 percent to $82,000 from $76,900 in 1997.
* The average mortgage length jumped to 28.9 years from the 1997 average of 28 years for first-time home buyers and to 27.9 years from 26.7 years for repeat buyers. This tendency toward longer mortgages can be attributed to the overwhelming choice of home buyers to finance their purchases using conventional fixed-rate mortgages.
Who is Buying Homes in America?
Total home sales in the markets surveyed in 1998 increased by 12.5 percent, reaching a record 2,075,000 homes, compared with 1,845,000 in 1997. The survey revealed a particularly significant surge in married buyers - up 16.4 percent to 1.39 million- as well as an increase of 13.6 percent among widowed, divorced or separated buyers.
Single, never-married buyers rose slightly from 1997, with an increase of 0.2 percent to 406,700, in contrast to the 28.9 percent increase over 1996. Similarly, minority buyers increased their market share only 5.5 percent in 1998, to 442,000 total purchases from 419,000 purchases the year before.
"People who had been unable to quality for home loans were afforded the opportunity when interest rates fell below 7.5 percent in 1997 - and they took full advantage of it," Pfister said. "The huge increase in single and minority home buyers in 1997 flooded the market."
While each year brings dramatic increases or decreases in many home-buying statistics, several survey results remain relatively steady.
For example, for the third year in a row, the average family size for the entire survey population was 2.8 people. Similarly, the average age of repeat buyers remained 41.1 in 1998, as it was in 1997 and 1996.
The average age of first-time home buyers fell only slightly during the past three years - 32.2 in 1998 vs. and 32.4 in 1996.
During the life of the survey, the average time spent saving for a down payment has remained relatively flat as well - 2.3 years for 1998, 2.2 years in 1997, 2.4 years in 1996, and 2.4 years for the base year of 1976.
Chicago Title Corporation, through its subsidiaries, provides title insurance, escrow and closing services, as well as property valuation, credit information, flood compliance and property inspection products through a network of more than 300 offices and approximately 3,800 agents nationwide. Chicago Title Corporation's title insurance subsidiaries - including Chicago Title Insurance Co., Ticor Title insurance Co. and Security Union Title Insurance Co. - issue approximately one in every five title insurance policies in the United States. Other real estate-related services subsidiaries include Chicago Tide Flood Services Inc.; Chicago Title Credit Services Inc.; Chicago Title - Market Intelligence Inc.; Chicago Title Field Services Inc.; and Consolidated Reconveyance, a division of Chicago Title Insurance Co.
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|Publication:||Real Estate Weekly|
|Date:||Mar 17, 1999|
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