Robust Economy Leads to Increased Home Prices,
Lower Down Payments and Higher Monthly Payments
CHICAGO, Jan. 28 /PRNewswire/ -- While consumers utilized exceptionally
low interest rates to boost U.S. major market home sales 12.5 percent in 1998,
the most notable changes in the housing market were driven by repeat buyers,
who tended to purchase much more expensive homes in 1998 and finance them
with secure, fixed-rate mortgages. These are some of the findings of Chicago
Title Corporation's (NYSE: CTZ) 23rd annual survey, "Who's Buying Homes in
America."
"Consumer confidence levels were at an all-time high last year. With
the exception of a brief downturn in the market that occurred after the peak
summer-buying season, the economic environment was extremely positive for
home buyers," said John Rau, president and CEO of Chicago Title. "These
factors, combined with interest rates that were lower than we've seen for 30
years, made for a very favorable home-buying market in 1998."
Since 1976, Chicago Title has conducted the survey, "Who's Buying Homes in
America," to identify and track the home-buying behaviors of consumers in
major U.S. metropolitan markets. This year, the survey polled a
representative sample of recent home buyers in 20 markets: Atlanta, Boston,
Chicago, Cleveland, Dallas-Fort Worth, Denver, Detroit, Houston, Los
Angeles, Memphis, Tenn., Miami, Minneapolis-St. Paul, New York City, Orange
County, Calif., Orlando, Fla., Philadelphia, Phoenix, San Francisco,
Seattle-Tacoma and Washington, D.C.
According to the survey, the median home price in the 20 markets surveyed
rose 5.1 percent to $167,900 in 1998 from $159,700 in 1997. The average home
price, however, outpaced the median, rising 8.2 percent to $208,000 from
$192,300 in 1997. This jump can be attributed to the trend among repeat home
buyers to purchase much more expensive homes.
Among repeat buyers, the median purchase price rose 6.2 percent to
$189,800 from $178,700 in 1997. The average home price for repeat buyers grew
even more substantially, rising 9.7 percent to $244,300 from $222,700 in 1997.
For 1998 first-time home buyers, the median price rose 5.0 percent from the
previous year to $142,200, and the average home price grew 4.8 percent to
$165,400.
The survey found that home buyers generally had higher incomes, but
applied less toward their initial down payment and accepted higher monthly
payments. This was particularly evident in the repeat buyer population,
which constituted 53.8 percent of home buyers, while first-time buyers fell
back slightly to 46.2 percent of those surveyed in 1998.
Nearly 80 percent of home buyers in the markets surveyed chose a
fixed-rate mortgage -- an increase of 10.1 percentage points from the previous
year. "Home buyers were anxious to take advantage of the decreasing interest
rates and lock in mortgages at favorable rates," explained John Pfister, who
directs Chicago Title's marketing research effort.
Among the survey's other findings:
-- Taken as a percentage of the sales price, the average down payment
dropped to 19.3 percent from 20.3 percent for all home buyers surveyed.
First-time buyers reduced their down payments to 12.8 percent from 13.7
percent, while repeat buyers' down payments decreased to 24.9 percent
of the purchase price from 26.1 percent in 1997.
-- The average monthly payment rose in 1998 to $1,212, an 8.8 percent
increase from $1,114 in 1997. First-time buyers made 4.8 percent higher
monthly payments ($1,069) than their 1997 counterparts ($1,020). But
the big leap was among repeat buyers who paid 12.2 percent more per
month -- an average of $1,343 compared with $1,197 in 1997.
-- These increases in monthly payments, however, didn't take a bigger
chunk out of home buyers' after-tax income: 32.3 percent in 1998
compared with 32.8 percent in 1997.
-- The reason for this trend is that household income among all
surveyed home buyers rose 6.8 percent in 1998 to $70,600 from $66,100
in 1997. First-time home buyers reported household incomes averaging
$57,200 -- up 6.3 percent from 1997 ($53,800). There was also a marked
increase in the household income of repeat buyers, which was up 6.6
percent to $82,000 from $76,900 in 1997.
-- The average mortgage length jumped to 28.9 years from the 1997
average of 28.0 years for first-time home buyers and to 27.9 years from
26.7 years for repeat buyers. This tendency toward longer mortgages
can be attributed to the overwhelming choice of home buyers to finance
their purchases using conventional fixed-rate mortgages.
Who IS Buying Homes in America?
Total home sales in the markets surveyed in 1998 increased by 12.5
percent, reaching a record 2,075,000 homes, compared with 1,845,000 in 1997.
The survey revealed a particularly significant surge in married buyers -- up
16.4 percent to 1,390,000 -- as well as an increase of 13.6 percent among
widowed, divorced or separated buyers.
Single, never-married buyers rose slightly from 1997, with an increase of
0.2 percent to 406,700, in contrast to the 28.9 percent increase over 1996.
Similarly, minority buyers increased their market share only 5.5 percent in
1998, to 442,000 total purchases from 419,000 purchases the year before.
"People who had been unable to qualify for home loans were afforded the
opportunity when interest rates fell below 7.5 percent in 1997 -- and they
took full advantage of it," Pfister said. "The huge increase in single and
minority home buyers in 1997 flooded the market."
Steady Indicators
While each year brings dramatic increases or decreases in many home-buying
statistics, several survey results remain relatively steady.
-- For example, for the third year in a row, the average family size
for the entire survey population was 2.8 people.
-- Similarly, the average age of repeat buyers remained 41.1 in 1998,
as it was in 1997 and 1996.
-- The average age of first-time home buyers fell only slightly during
the past three years -- 32.2 in 1998 vs. and 32.4 in 1996.
-- During the life of the survey, the average time spent saving for a
down payment has remained relatively flat as well -- 2.3 years for
1998, 2.2 years in 1997, 2.4 years in 1996, and 2.4 years for the base
year of 1976.
Chicago Title Corporation, through its subsidiaries, provides title
insurance, escrow and closing services, as well as property valuation, credit
information, flood compliance and property inspection products through a
network of more than 300 offices and approximately 3,800 agents nationwide.
Chicago Title Corporation's title insurance subsidiaries -- including Chicago
Title Insurance Co., Ticor Title Insurance Co. and Security Union Title
Insurance Co. -- issue approximately one in every five title insurance
policies in the United States. Other real estate-related services
subsidiaries include Chicago Title Flood Services Inc.; Chicago Title Credit
Services Inc.; Chicago Title - Market Intelligence Inc.; Chicago Title Field
Services Inc. and Consolidated Reconveyance, a division of Chicago Title
Insurance Co.
SOURCE Chicago Title and Trust Company
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Related links:
http://www.ctt.com
Company News On-Call:
http://www.prnewswire.com/comp/117465.html or fax,
800-758-5804, ext. 117465
CONTACT:
Stephen Flanagan, 312-223-2959, Bill Scott,
312-223-5030, or Kathy Graves, 312-223-2462, all of Chicago Title
and Trust Company
NOTE TO EDITORS: For further information on the survey or other
products and services from Chicago Title Corporation, visit the
web site at http://www.ctt.com
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