The U.S. has been underbuilding housing for more than two decades. The reasons are plentiful: lack of skilled labor, availability and cost of land, local regulations which make building difficult, and the ongoing supply crisis. If it’s hard to find your full grocery list to make a recipe, it’s going to be even harder to find every material needed to build a home. Estimates conclude the housing supply needed to meet current demand is up to 6.8 million units (and not to be overlooked, what is needed more than anything is affordable housing inventory). Given the housing supply crisis, it is not a surprise the typical primary residence home buyer today is likely to purchase an existing home rather than newly built construction. Let’s take a look at what is being purchased.
The share of buyers who purchased a new home last year was 15%, which is down from 28% in 2003, when there was more new construction in the U.S. In recent years, the share of buyers purchasing new homes has been as low as 13% in 2019. On the flip side, in 2021, 85% purchased an existing home. The highest share to purchase an existing home was in 2019 at 87% and the lowest share was in 1989 at 71%.
What becomes more interesting here is the age of homes purchased. With the dearth of new construction for more than two decades, it is not surprising that the age of the homes purchased, over time, has naturally become older. In 2021, the typical home that was purchased was built 28 years ago—in 1993. That has steadily increased over the last decade. In 2011 the typical home purchased was built 18 years prior.
Buying an older home is not for the faint of heart. Repairs may need to be made and systems upgraded. Home buyers cite one of the top benefits real estate agents provide is helping them understand faults and features in a property. Buyers may go in with a clear understanding after thorough home inspections.
Perhaps not surprising, the younger the buyer, the older the home purchased. Young buyers are more likely to feel the financial pressure of rising home prices and the lack of affordable inventory and are more willing to buy a fixer-upper. Eleven percent of Young Millennials (ages 22 to 30) purchased a previously owned home to DIY a fixer upper compared to just 3% of buyers over the age of 66. Repeat buyers in the market are more likely to have equity from their past home and are able to purchase newer homes that may need less work once the buyer is in.
Remodeling and repairing items may be a small investment after a buyer finds the home they desire with tight housing inventory and steep competition. Twenty-three percent of first-time buyers compromised on the condition of the home they purchased. For buyers, especially first-time buyers, this may be a compromise worth making for the best location, size, and price of the home.