The pandemic and the 2020 recession have shifted the housing market, altering buyers’ preferences, according to a Zillow study of homebuyers who purchased from March 2021 through August 2021.

In 2021, the typical U.S. homebuyer is:

  • a member of Generation (Gen) X
  • college educated;
  • partnered or married; and
  • is most likely to buy a home in the Southern U.S., according to the Zillow analysis.

Among homebuyers who purchased new homes in 2021, 79% purchased a single family residence (SFR). However, the share of SFR purchases is actually losing ground to smaller, less-expensive options, as:

  • 11% purchased an attached townhouse, up from 8% in 2020; and
  • 10% purchased a condominium unit, up from 6% in 2020.

Homebuyers prefer technology that makes the home searching process easier and since the beginning of this pandemic, this preference has increased. In 2021, to conduct their home search:

  • 68% of homebuyers prefer 3D tours; and
  • 61% prefer to schedule in-person tours online.

Most homebuyers reported mortgage interest rates and various life events influenced their decision to move to a new home. Of those homebuyers who purchased in 2021:

  • 60% cited low mortgage interest rates;
  • 42% cited a change in their household or family size;
  • 30% cited remote working; and
  • 28% cited a new job or job transfer.

On top of low interest rates and an increased demand for homebuying, low inventory has made the market even more competitive.

Over the last three years from 2018 to 2020, the number of unsuccessful offers submitted per homebuyer has jumped. As of 2020, the average homebuyer now submits two offers instead of one. Further, in 2021, homebuyers now are 50% more likely to receive a mortgage rejection once before being approved compared to prior years. Further, cash buyers made up a larger share of the buyer pool, with 32% of homebuyers reporting using all cash, up from 28% in 2020.

For first-time homebuyers, who lack significant savings or home equity, it’s even more challenging.

Trends in homebuying

Despite the continuing impacts of the pandemic and the 2020 recession, homebuying continues. But the share of first-time homebuyers is dwindling.

In 2018, 46% of the U.S. homebuyer population was a first-time homebuyer. Since then, the share of first-time homebuyers decreased slightly to 43% in 2020 and a measly 37% in 2021, according to the Zillow survey. Without a steady stream of homebuyers, especially first-time homebuyers, sellers will soon find themselves in trouble.

First-time homebuyers are struggling to compete and stay in the market. Here in California, significant home price increases and historically low inventory have made a challenging two years even more difficult for those lacking access to cash or home equity. High competition with current homebuyers with more purchasing power has also made it more challenging for first-time homebuyers.

In California, for the last eighteen months, ready homebuyers inflicted with fear-of-missing-out (FOMO) have been snatching up inventory, taking advantage of low interest rates and stimulus boosts. Homebuyers have now backed off since the effects of stimulus have worn off and interest rates have increased.

2022 will see a decline in demand as homebuyers take a wait-and-see approach following the expiration of the foreclosure moratorium and the return of forced sales. But agents can prepare for a homebuying recovery to begin around 2023-2024.

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