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As I sat down to write this article, the phrase “sell ice to an Eskimo” kept coming to me. Selling a home, especially in today’s market, is all about knowing who your Eskimos are and recognizing that they don’t want or need ice! The more a seller knows about their potential buyer, the more they can leverage that knowledge to maximize their sales price.
Today’s home buyer falls into 3 age groups: Baby Boomers (45+ years old), Gen-Xers (35-44 years old), and Gen-Yers (17-34 years old), and 3 categories: first-time buyers, repeat buyers, and investors.
The National Association of Realtors recently published a Profile of Home Buyers and Sellers–2010. According to the profile, 42% of buyers in 2010 were Gen-Yers, 21% were Gen-Xers, and 37% were Baby Boomers. 50% of all buyers in 2010 were first-time buyers, and 35% were repeat buyers.
A recent AP article states that tighter lending standards in the last year have caused the number of first-time buyers to drop to 29% of the market while the number of all-cash sales (i.e. investors) has doubled to 32% of the market. This means that investors make up more than 32% of the market because this figure does not take into account those investors that finance their purchase.
So what are these buyers looking for?
Investors
Primarily, investors are buying foreclosures, putting more cash into rehabbing the properties, and then either flipping them or renting them out. Lately, I find more investors renting the properties out than flipping them. With fewer people buying, the demand for rentals has skyrocketed, causing rents to go up. This allows investors to collect a monthly dividend on their investment while they wait for the housing market to recover, letting them sell their investment properties at an even greater profit.
First-Time Buyers
First-time buyers are typically young singles or young families. According to a recent Coldwell Banker survey, 87% of first-time buyers want a home that is move in ready where all but minor (such as painting) repairs and updating have already been done. This comes as a surprise to most sellers; condition does matter! 78% said the home had to be in an area convenient to shops and services. 75% said it was important to be close to their place of work. Nearly 67% said it was important to be near “highly-rated” schools.
Repeat Buyers
This category of buyers spans all three generations of Baby Boomers, Gen-Xers, and Gen-Yers. This is also the category of buyer that has taken the biggest hit because their ability to buy a home is dependent on their ability to sell a home. Repeat buyers are motivated by three major factors: desire for a larger home, change in family situation, and job-related relocation or move.
Baby Boomers
Most Baby Boomers have plans to downsize if they haven’t already; in fact, it was predicted that these empty nesters were going to downsize en masse, and developers started building 55-plus or “Active Adult” communities to accommodate the expectant demand. The demand has not happened, not because Baby Boomers don’t want to downsize, but they are unwilling or unable to sell their current homes according to a recent New York Times article. As the housing market starts to improve, the shift to downsizing will probably pick up again, but the age of those that are ready to downsize will be extended as more people put off retirement and/or need the larger homes to accommodate children or other family members that are still living at home.
A trend that I have noticed in our area is the number of retirees who sold their local homes in order to retire to warmer climates that are moving back to the area to be near children and grandchildren. There is no data to support this; it’s just my observation–especially in the last year.
Gen-Xers
This group is still looking for what most Americans would consider the “traditional” American home. According to an article published by the National Association of Home Builders, this is the most active of the three age groups–“in full force with their careers and they need to accommodate growing families.”
Gen-Xers are looking for:
- more space to expand family
- a fireplace in the living room
- a great room (instead of separate, more formal spaces)
- a sense of flow between indoors and outdoors
- a separate shower and tub
- ample storage space
- dark wooden cabinetry
- 70% said they would pay $5,000 extra for a green home
- 46% said they would prefer living in a suburban development with a larger lot, versus living in a smaller home in a walkable neighborhood
Gen-Yers
For me, this is a fascinating group of buyers. They made up the bulk of buyers last year, largely due to the First-Time Home Buyer’s Tax Credit, but tightening credit and the expiration of the tax credit has changed this. They might not be the most active group of buyers in the next couple of years, but they have the potential to change the landscape of housing when they do become more active.
Gen-Y characteristics include technical savvy. They prefer to text instead of talk on the phone, but when it comes to marriage, home, and hearth, they are more similar to their grandparents than their parents. Gen-Yers are civic minded and feel a duty to improve their communities. They have an optimistic outlook with a majority of them expecting to achieve their vision of the American Dream. Career ambition is not as important to them as a focus on personal pursuits. Two thirds of college graduates will have an average of $19,000 in student debt which will initially hinder their ability to save or acquire assets such as a home.
During a conference of the National Association of Home Builders at the beginning of the year, several sessions focused on what Gen-Yers are looking for in a home, including a key finding: they want to walk everywhere. 88% want to be in an urban setting with shopping, dining, and transit. Here are other features Gen-Yers are looking for:
- ethnically diverse communities
- outdoor space for grilling and entertaining (think outdoor living rooms)
- amenities such as fitness centers, game rooms, and party rooms
- open family spaces with fewer walls
- smaller rooms and less square footage
- bigger shower stall
- space in front of the TV for playing Wii or eating
- eco-friendly
Features Gen-Yers do not want:
- cookie-cutter type of development
- lawn-mowing
- cavernous hallways
- soaking tubs
- formal dining rooms and dinner parties at formal dining room tables
- large McMansions that require money and need for more furniture
If you are a homeowner and are thinking about making renovations, thinking through how long you will be in your home and who your buyer will be when you are ready to sell can help guide your decisions. An experienced real estate agent is also a great resource. I have helped many clients during renovation projects, long before they are ready to sell their home.
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