The Rising Influence of Pets in Homebuying Decisions

Welcome, friends, to the Center for REALTOR® Development podcast from the National Association of REALTORS®. We are here in Part 2 with my guest, Dr. Jessica Lautz from NAR. Dr. Lautz is the Deputy Chief Economist and Vice President of Research at the National Association of REALTORS®.

We are releasing this interview in two episodes. This is Part 2.

Now, each one of these episodes stands alone, but we encourage you to start with Episode 1 or even go back to it for some more context.

[1:10] Welcome back, my favorite data researcher! Thank you so much for being with me and with our listeners. I love how you get to talk to everybody around the country and share all the good scoop and help keep us informed.

[1:25] Dr. Lautz says it's a highlight of her job. She loves having boots on the ground, seeing what's going on in local markets, what REALTORS® are feeling, and what the pulse is. Talking to people is important.

[1:43] Monica recommends that listeners take the opportunity to go listen to Dr. Lautz and hear some of her great stories.

[2:17] We're going to talk a little bit more specifically about clients and client needs, especially our first time home buyers. The demographic has shifted.

[2:40] Dr Lautz explores the data. First-time homebuyers are different today. First-time homebuyers have dropped to the lowest level the NAR has ever recorded, dating back to 1981. It's just 24% of the market. In a healthy market, it would be 40%.

[3:05] The 24% figure is an annual figure from last year. Monthly figures are ticking up, and this looks like it will be a better spring for first-time home buyers.

[3:44] The median age of first-time homebuyers is now 38 years old. That's an all-time high. The median age historically was 28. Housing affordability and lack of inventory are issues.

[4:13] Saving for a down payment is also difficult because of higher rent, student loan debt, childcare costs, car loans, and inflation.

[4:33] First-time homebuyers' annual income has jumped by $26K in the last two years. The housing market has removed anyone with a lower income. Doctors and investment bankers will win out over first responders and schoolteachers. It's a different type of first-time homebuyer.

[5:25] First-time home buyers' down-payment sources are different, too. They're more likely to use financial assets like stocks, 401(k), and cryptocurrency. They are still using the bank of Mom and Dad. Inheritance use is also up.

[6:50] Dr. Lautz says we are seeing a generational transfer of wealth. The use of inheritances is at an all time high, but still in the single digits. Some parents are passing wealth along while they're still thriving. We have seen it come down, though. It may be uncomfortable for a 40-year-old to ask a parent for cash.

[8:11] Dr. Lautz sees some 20-somethings and even Gen Zers coming into the market. Gen Z makes up 3% of the market. Young Millennials and Gen Zers may have learned from the mistakes of older Millennials who got graduate degrees. Some of that has to do with the Great Recession.

[8:41] The big thing we've learned from today's young buyers is that they're willing to make some financial sacrifices, like living with parents for a longer time, not paying a huge rent. That allows them to earn homeownership sooner.

[9:49] Dr. Lautz has found that when these young adults move into home ownership, half of them had been paying rent to family members they were living with.

[10:37] How does a young adult build a credit portfolio while paying rent to parents and living at home? Dr. Lautz says that's a good question! What about people working in the gig economy? Monica says we need to research that.

[11:58] Dr. Lautz says there are fewer sales at the lower price points. She thinks that translates into fewer properties at lower price points. She is seeing growth in the luxury homes, or $1 million and up, sector. Home prices keep going up. Homes at lower price points may not be move-in ready.

[13:00] An issue for first-time homebuyers is that lower-priced homes are not move-in-ready. First-time homebuyers are buying the oldest homes, in the worst condition, where they need to put in remodeling costs. That costs money. Unless you can DIY very confidently, you may have to hire someone to fix it.

[13:27] That may not be the best use of money for a cash-strapped first-time homebuyer.

[14:14] Dr. Lautz sees rental prices in a much better situation than in the last couple of years. In 2022, there were bidding wars for rental units. So then builders built a lot of high-end multi-family properties to meet the demand. Rental prices for a new lease have come down from where they were.

[16:10] Dr. Lautz speaks of people wanting nicer amenities in their rental, while they save to buy a home.

[16:42] We're also seeing a growth in built-for-rent single-family homes. In communities where ten properties are being built, one of those single-family homes is just for rent. Builders understand there's growth there as the age of first-time homebuyers goes up and families want to move into homes.

[17:38] Dr. Lautz says we need more new construction. Builder sentiment has retreated in the last couple of months. Builders say the underbuilding has happened because of the lack of skilled labor, the lack of land, permitting costs, and the lack of supplies.

[18:12] When we look at it as a nationwide whole, we're short about five million homes in the U.S. We need to build that amount of homes to meet the pent-up demand that we have.

[18:51] Dr. Lautz says that in the last month, newer homes are within $100 of an existing home as a national median. If a new home seller has a rate buydown program to attract buyers, that could be a sweet spot for first-time homebuyers, working with a REALTOR® and representation, of course.

[20:01] Monica talks about the value of working with a REALTOR® when buying a new home, to help with anything that could go wrong. An experienced agent who's done new construction deals can help you watch for things and ask better questions. Be sure to get an inspector in the process.

[20:57] Dr. Lautz loves talking about single buyers. When we look at these trends, we see a reflection of the U.S. There are fewer married couples in the home-buying market. We're seeing a lot of single women. Dr. Lautz is impressed by single women. They're a quarter of first-time homebuyers.

[21:21] As seniors in the market, single women are outperforming. This is also true for Gen Z. A first time homebuyer single woman is buying on a lower household income, saving for a longer period, and purchasing her first home; it's important to her.

[22:03] Single women as homebuyers are more likely to be single moms. They're also more likely to purchase multi-generational homes. Perhaps they have an elderly relative with them. They buy to remove the unknowns. Knowing the school district. Knowing they don't have to worry about a landlord.

[22:45] Dr. Lautz sees single men first-time homebuyers moving because they have a job change or are in retirement. She's not seeing many single men actively in the market. They have been about 10 or 11% of the market since the 1980s.

[23:24] Monica cites Think and Grow Rich, about money as a motivator for men. She notes Think and Grow Rich for Women came out more recently, focusing on the complex motivators for women. Monica suggests asking men about their long-term goals and how homebuying increases their net worth.

[24:11] Monica says there are a lot of men and women of all ages who do want to get married but are struggling to find a partner. Having a house and a sense of stability may be an attractive factor.

[25:44] Dr. Lautz says the majority of buyers now are repeat buyers. Their median age is 61 years. Forty years ago, the median age would have been 36 years old, Baby Boomers have a lot of cash from their housing equity. They want to move to be closer to their grandchildren or healthcare.

[26:38] Dr. Lautz says the NAR asked repeat home buyers what motivated them to move, and they say it's downsizing, but the data shows they're downsizing 100 square feet, if that. They're going into a newer, nicer space but not necessarily downsizing. Monica says it may be downsizing their yard.

[27:10] Some of them are moving into city centers, suburbs, or small towns, but someplace where they have amenities or where they don't have to do outdoor upkeep. When they purchase at age 61, they're planning on living there for 15 or 20 years. Aging in place is probably their intention.

[27:45] Monica talks about some features of 55-plus communities, with group activities, crafts, hobbies, and making music together. Monica visited a community with parties. She went to one of the parties. The band members were in their sixties and seventies. There was a great community and lots of activity.

[28:36] Dr Lautz thinks these communities are adapting to what Baby Boomers want, and it's different from past generations at the same age. People are thriving and living longer and are healthier longer.

[29:16] Dr. Lautz has comments about pets. Pets are a $152 billion business in the U.S. Sixteen percent of homebuyers said their pet will be a factor in their home-buying decision. The neighborhood has to be walkable, the yard has to be fenced, and the grooming center and vet have to be close.

[30:39] REALTORS® can talk to their clients about a "catio" or wide enough windowsills for cats, where to put the litterbox, or other pet-related topics.

[32:01] Dr. Lautz's final word: It's an interesting market. We're seeing a lot of changes, whether it's demographics, or seeing the all-time high of the all-cash buyer, or the struggle of first-time homebuyers. Keep your pulse on all of the changes because it is a changing market.

[32:17] Please check on our research, it's a huge NAR benefit. It often goes under the radar. The easiest way to check it out is to follow NAR Research on every social channel: LinkedIn, Instagram, Facebook, X; we are everywhere that you are.

[32:34] Follow us and you can get the latest and greatest infographics, as well, that you can share with your clients.

[32:39] Monica adds that we all need some social media tools so you can go follow NAR Research and share all their infographics. Somebody's doing the work for you to create things for you to share. Awesome!

[32:51] Thank you so much, Dr. Jessica Lautz, for being with us here today and giving us the latest and greatest scoop!

[33:01] I want to remind you again of all the learning opportunities at Learning.realtor. Go over there and see what course you might need to fill in any gaps that you have about seniors, first-time homebuyers, or mortgages. There are so many great courses there. New construction…

[33:19] For almost everything we've talked about, you can find a class over there. If you can't find it in person, you can find it online at Learning.realtor. Thank you for joining us for Part 2!

[33:29] I'm Monica Neubauer for NAR's Center for REALTOR® Development. Now, go out there and sell some more houses, everybody!

Tweetables:

"It's a highlight of my job at NAR. … Boots on the ground, what's going on in all these local markets; what REALTORS® are feeling and what the pulse is. It's important. You can get the survey data but talking to people and getting the vibes is really important." — Dr. Jessica Lautz

"It's a different type of first-time home buyer. … Their down-payment sources are different. They're more likely to use financial assets; we haven't seen that as high. … Stocks, 401(k), cryptocurrency, even. Still using the bank of Mom and Dad." — Dr. Jessica Lautz

"When we look at it as a nationwide whole, we're short about five million homes in the U.S. We need to build that amount of homes to meet the pent-up demand that we have." — Dr. Jessica Lautz

"If a new home seller has a rate buydown program to attract buyers, that could be a sweet spot for you, working with an agent who is a REALTOR® and representation, of course, to make sure you are fully represented in that transaction." — Dr. Jessica Lautz

"It's an interesting market. We're seeing a lot of changes, whether it's demographics, or the all-time high of the all-cash buyer, or the struggle of first-time homebuyers. Keep your pulse on all of the changes because it is a changing market." — Dr. Jessica Lautz

Guest Links:

Dr. Jessica Lautz, is Deputy Chief Economist and Vice President of Research at the National Association of REALTORS®.

NAR Resource Links

ABR® Accredited Buyer's Representative

Additional Links:

Crdpodcast@nar.realtor

Crdpodcast.REALTOR

Learning.REALTOR — for NAR Online Education

CRD.REALTOR — List of all courses offered

Host Information:

Monica Neubauer

Speaker/Podcaster/REALTOR®

Monica@MonicaNeubauer.com

MonicaNeubauer.com

FranklinTNBlog.com

Monica's Facebook Page: Facebook.com/Monica.Neubauer

Instagram: Instagram.com/MonicaNeubauerSpeaks

Guest Bio

Dr. Jessica Lautz is the Deputy Chief Economist and Vice President of Research at the National Association of REALTORS®. She has been with NAR since 2007.

The core of her research focuses on analyzing trends for both NAR members and housing consumers. She is in demand as a speaker and by major media outlets to provide commentary on the real estate market. She has testified before Congress on behalf of NAR.

She also volunteers at Nottingham Trent University as an industry fellow mentoring real estate graduate students, is a committee chair at the National Association of Business Economics, bakes birthday cakes for underserved youth with Cake4Kids, and sits on the board of the Food Recovery Network.

Dr. Lautz has been recognized by Housing Wire's Women of Influence and RISMedia's Newsmaker award.

Jessica received her Doctorate in Real Estate from Nottingham Trent University in the United Kingdom. She also holds a Master's in Public Policy from American University and undergraduate degrees in Political Science and Law and Justice from Central Washington University.