45. HOME SERIES 1 OF 8 -CHARACTERISTICS OF HOME BUYERS

Home Series 1 of 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. I’m your host, Adrian Shermer, joined by my fellow co-hosts, Rob Delavan and Lance Johnson. How’s it going today, gentlemen?

Rob Delavan   00:12

Good morning.

Lance Johnson   00:14

Good morning, everybody. Good to be here.

Adrian   00:16

Today marks the start of a new eight part series. We’ve just wrapped up our tax special and we’re moving back into the real estate world, one of my favorites and we’re going to be working our way through some of the characteristics of home buyers and sellers and really just kind of an in depth look at what’s going on in the market right now. Dispel some myths out there and also set some realities. So, before we dive into that, though, Rob, I know you had a bit of a success story with me that we wanted to talk about.

Rob Delavan   00:47

Yeah, in the last few weeks, the market has been very competitive in the Portland metro area and Adrian, you were working with my Senior Agent Rachel, as with a mutual client and there was a situation where there was 29 offers and we were able to get the contract for our client, the number one out of 29 and we were not the highest price. It was a fun one and it was a huge win for the clients. So, they were super happy and I believe they close in the next week or so.

Adrian   01:26

Yeah, absolutely, that so far, that’s my high watermark. If you hear that out there are definitely highly competitive environments like this and when there’s a super desirable property and this was definitely one of those, it was deep within the metro area, it was perfect for a family. One of 29 offers, I was told when I call the selling agent that I was a one of only two lenders who called there’s little stuff like that it’s just that bit of extra effort and the knowledge that that makes a difference. I had a great conversation with them short off a flight back from a trip I took and I think that did a lot to move the ball in terms of neutral, professional respect.

Rob Delavan   02:07

We’ll probably build out an episode and actually talk about this one start to finish. It’s actually a fun case study. But yeah, one the successful offer out of 29. That’s I don’t know, Lance, have you ever heard of any more than that?

Lance Johnson   02:25

You know, I think I’ve seen some in the 20’s but not 29.

Rob Delavan   02:29

I’ve never seen that many. I’ve seen it but I’ve never been part of a success story with this. So, anyway, upcoming events I wanted to share with our audience. So, we are looking at a few different things coming up. But the big one is we have a ROI and Delavan Realty, April 22, sip and mingle event and those we generally do every month and that is at our office in Lake Oswego and we’re looking forward to continue to promote that we will put links in the show notes down below for that and of course, references to our website and such as well as we’ll also have ROI-financial.com listed below and Delavan-realty.com below and Adrian’s directors mortgage website also…

Lance Johnson   03:31

I want to comment on that sip and mingle is just where clients, you know, come across people that are interested, but they’re fearful of meeting people, some people don’t like that, right and sometimes, it’s better to have a small event where you can bring a friend, just have some fun, talk about some upcoming events with the market, Russia, whatever and just kind of mingle at our legacy office and then learn to grows, are really kind of educational events and so look at those websites and we’ll have more of those on there.

Rob Delavan   04:11

And we’ll link to that in the show notes and those are a lot of fun. For today’s episode, we’re going to be discussing the characteristics of homebuyers based on stats received from the National Association of Realtors, basically summarizing through the year of 2021. The information provided supplies, understanding from the consumer level of the trends that are transpiring and again, this is a one of an eight part series.

Lance Johnson   04:45

So Rob, the question we have is based on these statistics from the NAR, they found that 60% of recent buyers were married couples, 19% were single females, 9% were single males and nine were unmarried couples. Did you find this to be the trend with your recent buyers during this timeframe?

Rob Delavan   05:08

I did, what’s interesting is, of course, we don’t have a scientific sample size, with our 70 some clients that we help buy or sell house this year. But the first thing that popped out on that was, the ladies are beaten the guys, basically double, women are buying houses and guys aren’t at single guys aren’t and then of course, there’s the whole concept of couples, married couples, there’s a higher level buying power, you get an economy of scale hugely from having two income earners and now, of course, you got kids and all those expenses and that sort of thing. But this has very much been the life change intersection events, the weddings, or newlyweds, the just had a child, did have some divorce situations where we’re selling. But the whole just coupling, decoupling growing families, that entire sort of thing is a huge life change intersection and people basically create their habitat around them, which is their homes, based on those things. So, very unscientifically, but yes, the statistics are there and what we see every day shows that is a huge driver, any further thoughts on that Lance?

Lance Johnson   06:45

I think there’s more statistics around females versus male, females will more likely, again, I don’t have the statistics, but just kind of what I’ve seen, I’ll have clients that are single females, whether it’s through divorce, or just never married and they’re more likely to adopt a child than a male would and again, I don’t necessarily have the statistics other than what I’ve noticed within my client base and so when you’re adopting a child you’re gonna kind of nest as you want to have that home. What I have noticed is people, younger individuals are more likely to not necessarily get married right away, but they’re economically they would buy a house together and one would buy and the other would rent, depending so they’ll cohabitate unmarried couples. So, I do agree with that, that they’re both cohabitate, more so than actually get married right away because economically, so it’s kind of and we call those dual income earner type of situations and planning, right? We’re always talking about what’s the vacation rental, what’s the house that we buy, that we make a rental, it’s just a different environment, they’re more likely to buy a rental than to buy a home.

Rob Delavan   08:16

Yeah, which is really interesting and that brings up some of the characteristics or highlights in this. Were the first time buyers made up 34% of all homebuyers and 2021 and that was an increase from the previous from 2020, which was 31%. So, it’s trending up. We’re seeing that a lot and like you’re saying Lance, there’s not the old standby of okay you get engaged, you get married, you save the order of operations, that’s, I believe it’s turning on its head a little bit. Another statistic, which we can chew on is the same typical first-time homebuyer was 33 years old this year, which is holding steady from last year, while like a repeat buyer. Average continued to climb to an all time high of 56 years old. So, people who are buying, so the other the not 34% that are first timers, it’s over 20 years later. So, there’s some concepts they’re older folks in their 50’s and 60’s are still buying and selling homes and actually at a lot higher rates than the younger ones are. So, yes, there’s the concept of the rich get richer, right? The longer you’ve been around and making money and saving and all of those sorts of things, the better you’re prepared to buy or sell a house. I’m sure there’s more insight that into that too Lance that you’re seeing from, especially from the financial side, Adrian, any other thoughts on the percentages here?

Adrian   10:06

No, I think that mirrors what I see as well in talking with folks, I do find it interesting that the unmarried couples are making that charge there and I do talk to a lot of folks. You know this kind of segues into the next point I was gonna make, which is that 20% of homebuyers, the primary reason for purchasing a home is the desire to own a home of their own. For first time homebuyers specifically, this number jumps to 65% and we see a lot of these first time homebuyers in an unmarried couple, I really do, I think that people are starting to push that before the marriage and maybe it’s because a wedding is so expensive, on average, now that buying a house is actually a more mild prospect in a lot of ways. But it’s also an investment and I think that people are waking up to these ideas, I’m sure that our audience is also, within that group, so that you’re going to pass that advice on to your kids not get married as soon as you can and just start popping out kids unnecessarily. But hey, why don’t you get yourself financially secure first, because babies are kind of expensive and it’s only going to get harder as you work your way down that traditional pathway in life. So, I like that trend, I think it’s cool and I personally was halfway big through trying to do a, I was gonna do like a series, I was like, man, my wife joins all these women, empower groups and she’s a business owner, I’m very proud of everything she’s accomplished. Maybe there’s a way I could reach out to women and help them, own houses at a higher rate and then I ran into statistics like this and I was like, shoot, actually to help the boys out, we’re two fold behind but it’s that mentality, it’s that I think it’s a great example that you use lands, it’s the nesting idea, the planning, it’s setting a course for the right future for yourself and it’s very smart.

Rob Delavan   11:55

Yeah, the security is a big piece there.

Lance Johnson   11:58

Well and there’s a lot behind those numbers, if they were to further break them out. So, you look at those single females, how many of them got the old home or at the sale of the home that from a divorce, they’re more likely to own their own, have a child, the unmarried couples, you know, you’ll see the, again, you’re getting, I don’t want to stereotype but who’s driving the unmarried couples scenario? There’s a lot behind the numbers, I think that are, make it so it’s actually closer than you think and for whatever reason, they just felt that way…

Adrian   12:50

And there’s some others, before we move on to the next questions is, there’s a few other stats here I’d like to share with you guys. 11% of homebuyers purchased multi-generational homes, typically to take care of aging parents, or because of children over the age of 18 moving back for cost savings and then there’s the whole breakdown. There’s a racial breakdown of 82% of buyers were white, Caucasian, 7%, Hispanic, Latino, 6% Asian Pacific Islander, 6% were black African American and 2% identified as other and that’s a very interesting study on percentage of homebuyers within the population versus the actual makeup of the population in different areas and there’s some disparities there, that we can dive into on a completely different episode actually multiple episodes. 89% of recent homebuyers identified as heterosexual, 4% is gay or lesbian, 2% is bisexual, 1% prefer to self-described and 6% preferred not to answer. So, you can start looking at different things there also a whole another episode where we bring on some guests that are have higher qualifications to talk about a demographics than potentially we do and then there’s some breakdowns of like veterans, active duty service members, all of that sort of thing. So, a lot to unpack here and we’re barely scratching the surface again, this article through the National Association realtors, that is released every year of the year summary this is 2021 will be in our show notes.

Rob Delavan   14:47

So Adrian, in the initial stages of the process from lending to purchasing and you touched on it, the homebuyers primary reason for purchasing the home was desire to own of their own but for first time buyers that number jumped was 28%. For first time homebuyers that number jumps to 65%, the initial stages of the process from lending to purchasing, what’s that look like for first timers versus the folks that have owned previously?

Adrian   15:20

Yeah, it’s an interesting subject because especially from our perspective, right, we think of things on the financial side of things, we look at growth of wealth and all that sort of stuff. But there’s a huge push of just it being your own property to have that pride and ownership and to have something that you can modify in any way that you please, for better or worse and to take on the liability of maintenance, which does sound like a bad thing, but you’re paying for that when you rent, you know, obviously, they’re gonna make money off of you unless they’ve really ham-fisted their rental property or you’ve got a very, very kind landlord, who’s given you a break. So, transferring that risk to yourself, but then taking on the benefits of that risk by spreading that cost out over time is a way that people take ownership of their own future so yeah, it’s a really interesting statistic and I find it fascinating, that for such a high percentage, that’s the driving factor just to have a place of their own, that they can call their own.

Rob Delavan   16:22

So, I dig into this a little more and actually direct this towards Lance. Lance, I know you actually help a lot of young couples that are referred I’ve personally, you know referred folks to you that I’ve been surprised at their age, they’re so savvy, low to mid 20’s and they’re going after all of these adulting things that maybe I wasn’t doing until I was late 20’s or early 30’s. The process, lending is obviously not super easy. You really have to have a lot of things dialed in to do that but how does that lending process for those first timers, I guess I would ask you, will you speak to how you prep people for that lending and home purchasing process?

Lance Johnson   17:15

Yeah, well, I mean, there’s a whole process we go and going through planning, are they going to be putting 3, 5, 10% down? Are they putting 20% or more so that’s kind of a pivotal point because there are different programs out there? Are they gonna have to rely on retirement plan savings, do they have other debt? Are the parents gonna get involved? Are they getting married, which is paid by maybe the parents and then in that wedding party, will they go on a big, you’ll see some people for go there, going on a honeymoon and they’ll take the money from the wedding and they’ll put as a down payment on a house, so there’s all sorts of options that go on and then just walking them through, working with Adrian and working with the down payment and cash flow, one of the things I tried to do is I try to get them to save that 20% I’m always talking about so that when they buy a home, they can drop their savings down to 12 and we’re not really damaging their cash flow. They are used to it, you know what I mean? Like, so they’re renting and they’re saving 20% but now they’re owning and they’re maybe stretching their dollars a little bit, we can always bring, they’re not paying the rent, but they’re paying the mortgage, but it’s a little more than the rent with property taxes, we can always adjust their savings downwards, because working with me that I’ll slowly ramp it back up. Those are all techniques that kind of deal with cash flow issues, conditioning of cash flow and then, real estate is one of those things when it goes south you’re kind of stuck, I often talk about, you know, some issues that you run into back in [Inaudible 19:12] which was a unique time, but not a unique time. It’s happened before, but unique to us and what is the 1, 2, 3, 4 backup plans that are available, that if they’re crunched and one of them lost a job, what’s the risk reward and what’s your backup plan to get you through that 6 to 12 months?

Rob Delavan   19:40

Okay, so, linking our previous questions in the financial advising side, Lance, it’s a perfect segue. So, we’re highlighting married couples since they took up 60% of recent buyers. There’s a show so we’re gonna pull in a little popular culture here. There’s a show on Netflix called Marriage or Mortgage have either of you guys watched this?

Adrian   20:02

Yeah

Lance Johnson   20:04

My wife has watched it

Rob Delavan   20:06

So it is somewhat controversial. It brings to light two major financial decisions in a couple’s life and we’re gonna highlight, there was a bloomberg.com article on it, we’ll put that in the show notes, the states and I’m quoting here, “well, it’s obvious that the more practical move would be to buy a wealth building home, instead of throwing a party, the sensible choice doesn’t always make for great TV or even real life”. In that article, they’re parroting a typical viewer and it’s all in caps. It’s “no, don’t do it”. So, Lance, what are your thoughts on this question? Should you invest in a fancy wedding or should you invest in real estate in the first house instead?

Adrian   20:57

I have a feeling I got a premonition.

Lance Johnson   21:01

Smart thing, but there’s so many questions around it so is it one income earner is, some people have kids before they get married, or that’s the reason they’re getting married? My generation 55% of those people will get divorced before 60? I think the younger generation I think it’s actually even higher and there’s all sorts of reasons why independence of women and things like that, they’re not co-dependent on men anymore. Obviously, they’re willing to get house that’s from previous statistics. There are so many issues that come up. So, obviously, I would look at it, can you do your cake and eat it too, when, weddings are expensive. Who’s paying for it, that’s, you know I haven’t seen the show per se. So, I’m assuming it’s, the couples have to pay for it and if they are, you know, there’s going to be a bell shaped curve, you’re going to get a third of them are going to lean towards finances and be smart, a third of them are going to party it up and figure it out later and then 40% is going to kind of be swayed one way or another will probably compromise. They’ll take a lesser house and a lesser wedding, marriages are kind of a unique scenario, hopefully and you don’t want to minimize that. So, I would probably lean people to modifying and having lesser of the fancy wedding and but still get the house.

Rob Delavan   22:47

So there was one episode where in this article it talks about the couple gleefully rolling out a ranch dressing fountain at their down wedding and COVID be damned and yeah, you’re usually talking 25, $30,000 for a wedding or, you know, 20 to $40,000 for a down payment and it’s fascinating. I guess it’s binge worthy. I haven’t watched the show. But like you said, your wife’s watched it and I’m sure probably got some got a kick out of it. Adrian, you’ve watched it. You know, sometimes the train wreck is fun to watch, right?

Adrian   23:30

Yeah, it’s the funny thing about it. It sounds so comical, but it is a decision that people make all the time and they do they do get married. I mean, we’re seeing a trend line that it seems like people are buying houses more often before marriage and I’m for it. But there’s also a group of people, I’ve had people use their gifts from their wedding and they actually ended up cash positive, which sounds wild, but especially if your parents are contributing to the actual ceremony and you’re getting your gifts from your your family members and they go, give us cash, don’t give us a toaster, there’s no registry. They do the money dance maybe on if you’ve seen that, whatever it is and then they pull those funds and they do turn it into a house and so I think there’s a I don’t know if you need to go full ranch fountain, but there is a way to go about getting married and getting that security together and then buying a house using proceeds from that event and whatever else you might have tucked away in the process, hopefully but in my experience, your wedding will cost more than you thought it would. I don’t know a single person who came in under budget surprised but that they had money leftover in the coffers at the end so your mileage may vary.

Rob Delavan   24:46

Okay, thank you guys. That’s a wrap on our homebuyer characteristics for 21. Please stay tuned for our next episode in this eight part series. The next episode we’ll be learning about the characteristics of the actual homes that were purchased in 21. So, until then, we appreciate you guys commenting, go to our work cited, down below references for everything we talked about in the comments and our disclosures and until next time.