Times have been turbulent for the residential real estate market. Not only did the pandemic turbo-charge the industry’s reliance on technology, but historically-low inventory and high demand increased competition and housing prices. To assess current consumer behavior and opinions about the homebuyer market and refinancing, ServiceLink partnered with MarketCube to produce their “State of Homebuying Report.” Below are top-level findings gleaned from this nationwide survey of 1,000 homeowners conducted in April 2021.
Continued hot market fueled by upsizing
The homebuyer market has been particularly active: total year-end sales volume for 2020 reached 5.64 million units, the highest level since 2006, according to CNBC. In fact, 11% of survey respondents bought a home within the past year. Upsizing was a top reason for these purchases — especially for those in need of home offices. According to the survey, “despite the reduced inventory and a 15.2% spike in home prices since last year, 32% of respondents said they are still likely to purchase a new home this year.”
High costs deterring younger buyers
One-third of respondents considered, but decided against, purchasing a home in 2020. Cost was a significant factor behind these decisions, with the majority citing too-high prices or changed financial circumstances, and a significant percentage instead electing to upgrade their existing homes. Half of Gen Z and Millennial respondents changed their minds, compared with only 36% of Gen X and 8% of Baby Boomers.
Homebuyers are increasingly relying on digital approaches
Homebuyers, especially Gen Z/Millennials and Gen X, appreciate the convenience, ease-of-use, and time savings that technology brings. The majority of those who purchased a home in the past year researched property listings online, with 47% taking virtual tours and 18% even saying they would consider buying a property without first seeing it in person.
More buyers are tapping retirement funds to finance homes
According to the survey, 43% of respondents purchased their homes using cash or savings, while 42% opted to finance their homes through a traditional bank lender. “Some 27% of those who bought a home in the past year reported borrowing funds from their 401(k) to make the purchase, compared with just 9% of those who bought a home previously,” said the report. The youngest in the homebuying market were the most likely to draw from retirement funds.
Buyers loyal to existing lenders and in search of digital options
Many survey respondents were loyal to their current lenders, with more than 43% first seeking out their existing financial professionals when refinancing. Buyers also selected lenders based on positive online reviews and were attracted to those who allowed them to complete mortgage applications digitally.
An opportunity for even more refi transactions
With interest rates at historic lows, refinancing numbers grew in 2020 to their highest annual total since 2003, according to the survey. In fact, 30% of respondents refinanced in 2020, motivated by lower rates and the opportunity to use increased equity to finance home improvements. Younger buyers outnumbered Gen X and Baby Boomers in these transactions. Still, 50% of respondents said they are not likely to refinance in 2021—whether due to satisfaction with their existing rate, a desire for rates to drop further, reluctance to pay high closing costs, or the perception that the refi process is too time-intensive or overwhelming.