Chicago Title Survey Shows Consumers Maintain Confidence in 1999, But Rate
Hikes Greatly Impact Buyer Profiles
CHICAGO, Feb. 3 /PRNewswire/ -- A strong domestic economy and continued
low unemployment helped propel U.S. major market home sales by 6.0 percent in
1999. But gradually rising interest rates caused drops in market share for
both single and first-time buyers, leaving married buyers as the driving force
behind the housing market's fourth straight record year, according to Chicago
Title Corporation's 24th annual survey, "Who's Buying Homes in America."
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. The 20 markets surveyed include: 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.
For the past four years, the results of this annual survey have shown the
considerable impact of lower interest rates. For example, in 1997 the market
share for single and minority home buyers increased dramatically, attributable
to lower interest rates, which allowed more people to qualify for mortgages.
And while singles dropped slightly in 1998 -- primarily because the market had
been flooded the year prior -- the number of first-time buyers stayed
consistent. In 1999, however, market share for both single and first-time
buyers dropped, showing the impact of rising interest rates.
"Rising interest rates certainly affected buyer profiles in 1999, but
continued consumer confidence and the increase in married and repeat buyers
helped the home-buying market achieve another record year," explained John
Pfister, Chicago Title's marketing research coordinator.
The timing of the rate hikes also favored married buyers. Interest rates
were at their low during the first quarter, which is the typical buying time
for families. So when rates reached their August peak, most of the year's
married buyers had already purchased. Singles, in contrast, generally buy
throughout the year, and when rates began to climb, some singles began
dropping out of the market. The breakdown was as follows:
-- The number of married buyers increased 7.3 percent in 1999, from
1,390,000 to 1,491,600, while the number of single, never-married
buyers increased by only 3.0 percent, from 377,900 to 389,400.
-- Overall, married buyers made 67.8 percent of all home purchases in
1999; up from 67.0 percent in 1998, while single, never-married buyers
lost market share, from 18.2 percent in 1998 to 17.7 percent in 1999.
Similarly, repeat buyers lead the way compared to first-time buyers, as
the latter group is generally much more affected by interest rate hikes due to
basic buyer profile characteristics like household income. Also, first-time
buyers typically finance a larger percentage of their purchase because they
don't have a pervious home sale to contribute to the down payment. In 1999,
the comparison between repeat and first-time buyers was as follows:
-- Repeat buyers increased 9.0 percent in 1999, from 1,116,300 to
1,216,600, while first-time buyers increased just 2.6 percent, from
958,700 to 983,400.
-- Of the total number of homes sold in 1999, 55.3 percent were bought by
repeat buyers, up from 53.8 percent in 1998.
-- And while first-time buyers experienced a loss in market share, from
46.2 percent to 44.7 percent, the decline for Caucasian first-time
buyers was minimal (from 41.3 percent to 41.2 percent), which means
that almost the total decline in first-time buyer market share came
from minority buyers.
Home prices continued to climb in 1999, but the increases were not as
great as the year before. The median home price in the markets surveyed rose
4.5 percent in 1999, to $175,400 from $167,900 in 1998. The average home
price increase was 5.8 percent in 1999, to $220,000 from $208,000 in 1998.
This divergence between the median and average home prices shows that buyers
are still buying more expensive homes. However, when comparing the numbers
with last year, there appears to be a shift toward the middle of the pricing
spectrum.
The median home price for first-time buyers was $150,300, up 5.7 percent
from $142,200 in 1998. The median home price for repeat buyers increased only
3.1 percent, from $189,800 to $195,700. The average home price for first-time
buyers increased to $174,000 in 1999, up 5.2 percent from $165,400, while the
average price for repeat buyers increased by 5.3 percent, to $257,300 from
$244,300.
After drops across the board in 1998, two-income families made large gains
in 1999 among both first-time and repeat buyers, increasing to 84.0 percent
market share from 77.3 percent for first-time buyers and to 78.0 percent from
71.5 percent for repeat buyers. Overall, two-income families increased to
80.5 percent in 1999 from 73.9 percent in 1998.
The number of buyers choosing fixed-rate mortgages continued to climb in
1999, up to 80.4 percent of home buyers in 1999 from 78.8 percent in 1998.
However, adjustable/variable-rate financing also experienced slight gains in
1999 after a huge decrease in 1998. "Both increases were a result of rising
interest rates, which encouraged some buyers to lock in with fixed-rate
mortgages before rates rose further, while other buyers left their options
open with adjustable-rate mortgages," Pfister added.
Among the survey's other findings:
-- While more than half of all home buyers -- 50.7 percent -- made down
payments of 10 percent or less of their home's value, this figure was
down from 54.5 percent the previous year. The percentage of buyers
who made down payments of 20 percent or less also went down in 1999 to
77.2 percent from 79.7 percent in 1998.
-- The average monthly payment for all home buyers surveyed went up only
2.3 percent, to $1,240 from $1,212, compared with an 8.8 percent
increase in 1998. Household income grew at a faster pace --
4.1 percent -- but monthly payment as a percentage of after-tax income
stayed consistent from last year at 32.3 percent.
-- Following the continuing trend, the market share of new home purchases
increased -- to 22.7 percent from 21.2 percent -- while the percentage
of used home purchases decreased -- to 77.3 percent from 78.8 percent.
In contrast, in 1976, the base year of the survey, buyers purchased
15.1 percent new homes and 84.9 percent used homes.
Several statistics have remained relatively consistent from past surveys,
including:
-- For the fourth year in a row, the average family size of the entire
survey population was 2.8 people.
-- The average time spent saving for a down payment has remained
consistent -- 2.2 years for 1999, 2.3 years for 1998, 2.2 years for
1997 and 2.4 years for the base year of 1976.
-- Mortgage length has not wavered much in the past three years. For
first-time buyers, the average length of mortgage has hovered around
28.0 years, and for repeat buyers, the length of mortgage has
consistently been around 27.0 years.
Chicago Title Corporation (NYSE: CTZ), 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 340 offices and approximately 4,400 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 Corporation
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Related links:
http://www.ctt.com
CONTACT:
Bill Scott, 312-223-5030, or Stephen
Flanagan, 312-223-2959, both of Chicago Title Corporation
NOTE TO EDITORS: For further information on the survey or other
products and services from Chicago Title Corporation (NYSE: CTZ),
visit our Web site at http://www.ctt.com
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