In its new report, ServiceLink examines how the pandemic impacted the American homebuying process over the past year. The 2021 ServiceLink State of Homebuying Report features insights from 1,000 homeowners, and provides a better understanding of: how high home prices and low inventory impacted their decision to move or not; if they took advantage of historic low interest rates or why they didn't; and how the pandemic has influenced their experience with technology.
The study found that additional space was a motivating factor for many who bought homes in 2020, with 36% wanting to upsize from their current home; 32% purchasing an investment property; and 23% needing more space in order to work remotely.
Of those polled, 33% of buyers considered making a purchase in 2020, but ultimately decided against buying a home in the past year, with 34% deciding to upgrade instead; 31% finding that their buying options were too expensive; and 24% claiming that a change in their financial situation prevented them from purchasing a home. Nearly one-third of respondents (32%) believe they are likely to purchase a new home in 2021.
And of those who chose not to buy, but to remain in place and take advantage of record-low rates, the youngest generation of homebuyers led a surge in refinances in 2020. The share of refis over the past year, according to the study, was led by Generation Z/Millennials with 45% of the share, followed by Generation X with 30%, and Baby Boomers at 6%. Those who did not refinance last year mainly said they had a rate they were comfortable with (40%), or were waiting for rates to drop even further (27%). Additionally, 50% of respondents said they were unlikely to refinance in 2021.
In terms of financing a home, the survey found that 43% of respondents used cash or savings, 42% used a traditional bank lender, with 28% stating they received money from family and friends, either being gifted/inheriting funds (14%) or borrowed (14%) from those closest to them. Americans also seemed to be tapping into their retirement at a higher rate in 2020, as nearly 27% of those who bought a home in the past year reported borrowing funds from their 401(k) to make the purchase, compared with just 9% of those who bought a home previously. Baby Boomers were least likely to draw from their retirement accounts (1%), compared to Generation X (11%), and Generation Z/millennials (17%).
The pandemic forced more to use technology to improve and speed up of the homebuying process, improving consumer sentiment as well. More than two-thirds (68%) of respondents used some sort of technology during their homebuying process, and of those who did leverage tech, most used it to research property listings online (74%) or take a virtual tour of properties (47%). In terms of the benefits of mortgage technology, 68% cited the convenience and ease-of-use of tech, while 68% claimed it saved time, and 58% used tech in the homebuying process to protect their personal health and safety. While most respondents were receptive to technology, 18% even said that, moving forward, they would consider buying a home without seeing it in person first.
"The COVID-19 pandemic and market conditions forced the real estate industry to reassess how it serves today's homebuyer. With the evolution of technology to help streamline the process, it's not surprising that our data found consumers are turning to tech-enabled providers who can meet their needs through any phase of the process," said Dave Steinmetz, President of Origination Services with ServiceLink. "With interest rates at historic lows, I am encouraged by the number of younger respondents who have recently refinanced. However, for those unlikely to refinance this year, many could be leaving significant money on the table if they are waiting for rates to drop even further, as our study suggests. This demonstrates an opportunity for lenders to increase awareness and education around the benefits of refinancing in today's market."
Click here to access the 2021 ServiceLink State of Homebuying Report.