I just got back from the 2010 NAR Expo in New Orleans. I’ll be posting on that soon, but in the meantime, one of the more valuable sessions I attended was the presentation on this study. There is a wealth of information for real estate professionals to use here to help them understand buyers and sellers in light of today’s realities. Print this out for reading over your morning coffee, it’s a lot to take in on a computer screen.
The 2010 National Association of Realtors Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers.
Although typical sellers had been in their previous home for eight years, up from seven years in the 2009 study, first-time buyers plan to stay for 10 years and repeat buyers plan to hold their property for 15 years.
NAR 2010 President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said the pattern of home buyers taking a long-term view has solidified over the past few years. “This underscores two simple facts—home ownership encourages stability, and the longer you own, the better your investment.”
Even with several years of price declines, the typical seller who purchased a home eight years ago experienced a median equity gain of $33,000, a 24% increase, while sellers who were in their homes for 11-15 years saw a median gain of 40%.
“Sellers who purchased at the top of the market and had to sell in a short time frame were hurt by the price correction, but the vast majority who are able to stay for a normal period of home ownership generally built enough equity to make a trade-up purchase,” Golder said. “Despite swings in the housing market in recent years, the fact is most long-term owners see healthy gains in the value of their property.”
House flipping is virtually nonexistent in today’s market. “The primary exception is for experienced investors, many of whom pay cash and are making renovations or improvements after a careful study of properties, neighborhoods and market demand,” Golder explained. “The house flipping and quick gains which occurred during the boom period were abnormal, driven by risky, easy-money financing that should never have been allowed in the market.”
In the 2006 study, covering sellers during the close of the housing boom, 6% of sellers had owned their property for less than a year and a total of 30% had owned for three years or less. In the 2010 study, only 3% had owned their home for less than a year and a total of 11% had owned for three years or less.
Paul Bishop, NAR vice president of research, said the lion’s share of buyers view their home as a good investment. “Eighty-five percent of recent home buyers see their home as a good investment, and nearly half think that investment is better than stocks,” he said. “Even with the turmoil created by the housing boom and bust, this indicates the long-term view of home ownership as a fundamental goal and value remains sound. In fact, the single biggest reason most people buy a home is the simple desire to own a home of their own, cited by 31% of respondents, including 53% of first-time buyers.”
The next biggest reasons for buying, identified by all home buyers, were desire for a larger home, 9%; a change in family situation and the home buyer tax credit, cited by 8% each; a job-related move, 7%; and the affordability of homes, 6%. Twelve other categories were 5% or less.
The number of first-time home buyers rose to a record high 50% of all home sales from 47% in the 2009 study, building on success of the home buyer tax credit which began in 2009. The previous cyclical high for first-time buyers was 44% in 1991; records date back to 1981.
The profile shows the median age of first-time buyers was 30 and the median income was $59,900. The typical first-time buyer purchased a 1,540 square foot home costing $152,000, with 93% using the first-time buyer tax credit.
First-time buyers who made a downpayment used a variety of sources: 74% used savings, 27% received a gift from a friend or relative, typically from their parents, and 9% received a loan from a relative or friend. Eight percent tapped into a 401k fund, and 6% sold stocks or bonds. Ninety-five percent chose a fixed-rate mortgage.
The shares of entry-level buyers receiving a gift or loan were modestly higher than 2009 when 22% received a gift and 6% a loan from a relative or friend. “It appears more parents were motivated to help their children to take advantage of the home buyer tax credit and very favorable affordability conditions,” Bishop said.
Fifty-six percent of entry level buyers financed their purchase with an FHA loan, while another 7% used the VA loan program. Forty-two percent said financing their first home was more difficult than expected and 9% had been rejected by a lender.
Fifty-eight percent of all buyers are married couples, 20% are single women, 12% single men, 8% unmarried couples and 1% other. Bishop noted that women buyers have accounted for roughly one out of five transactions since the late 1990s, and single men have been at the one in 10 level since 1981. “A modest increase in the share of single men buyers may result from the home buyer tax credit, but this is the highest share for single men in the history of the study,” he said.
Buyers searched a median of 12 weeks and viewed 12 homes. Fourteen percent of buyers own two or more homes. The typical repeat buyer was 49 years old, earned $87,000, and purchased a 2,000 square foot home costing $215,000. The median downpayment of all home buyers was 8%, ranging from 4% for first-time buyers to 14% for repeat buyers. The median age of home sellers was 49 and their income was $90,000. Sellers moved a median distance of 18 miles and their home was on the market for 8 weeks, down from 10 weeks in the 2009 survey. Half traded up in size, 28% bought a comparably sized home and 21% traded down.
Sixty-four percent of sellers chose their agent based on a referral or had used the same agent in the past. Reputation was the most important factor in choosing an agent, cited by 35% of respondents, followed by trustworthiness at 23%. Eighty-four percent of sellers are likely to use the same agent again or recommend to others.
Forty-four percent of sellers offered incentives to attract buyers, such as home warranties or assistance with closing costs. The typical home sold for 96% of the listing price, compared with 95% in the 2009 profile.
Home buyers thought the most important services agents offer are helping find the right house, and negotiating sales terms and price. Buyers also most commonly choose an agent based on a referral from a friend, neighbor or relative, with trustworthiness and reputation being the most important factors.
Buyers use a wide variety of resources in searching for a home: 89% surf the Internet, 88% use real estate agents, 57% yard signs, 45% attend open houses and 36% look at print or newspaper ads. Although buyers also use other resources, they generally start the search process online and then contact an agent.
When asked where they first learned about the home purchased, 38% of buyers said the Internet; 37% of buyers from a real estate agent; 11% a yard sign or open house; 6% from a friend, neighbor or relative; 4% home builders; 2% a print or newspaper ad; 2% directly from the seller; and less than 1% from a home book or magazine.
Eighty-five percent of home buyers who used the Internet to search for a home purchased through a real estate agent, while 70% of non-Internet users were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.
Local metropolitan multiple listing service websites were the most popular Internet resource, used by 59% of buyers; followed by Realtor.com, 45%; real estate company sites, 43%; real estate agent websites, 42%; other websites with real estate listings, 41%; and for-sale-by-owner sites, 15%; other categories were smaller. Seventy-seven percent of all buyers purchased a detached single-family home, 9% condo, 8% a townhouse or rowhouse, and 6% some other kind of housing.
Commuting costs continue to factor strongly in buyer decisions, with three-quarters of buyers saying transportation costs were important. Environmentally friendly features remain a significant factor: 88% of buyers said that heating and cooling costs were important, 71% desired energy efficient appliances, and 69% wanted energy efficient lighting. Fifty-two percent of all homes purchased were in a suburb or subdivision, 18% were in an urban area, 17% in a small town, 11% in a rural area and 1% in a resort or recreation area. The median distance from the previous residence was 12 miles.
Not surprisingly, for-sale-by-owner transactions reached a record low, accounting for 9% of sales in the 2010 study, down from 11% in 2009. The share of homes sold without professional representation has trended down since reaching a cyclical peak of 18% in 1997. “In a market as challenging as today, it’s clear most home sellers need professional assistance,” Bishop said.
As seen in previous studies, many FSBO properties were not placed on the open market. Factoring out private sales between parties who knew each other in advance such as family or acquaintances, the actual number of homes sold on the open market without professional assistance was a record low 5%—the rest were unrepresented sellers in private transactions. The market share of open-market FSBOs is half of what it was six years ago—10% were sold on the open market in 2004.
The median home price for sellers who used an agent was $199,300 vs. $140,000 for a home sold directly by an owner, but there were important differences. The median income of unassisted sellers was $64,000, in contrast with $93,200 for agent-assisted sellers. Unassisted sellers were much more likely to be selling a somewhat smaller home, and they were more likely to be in a rural area. Combined, these factors suggest a lower value for FSBO properties.
The most difficult tasks reported by unrepresented sellers are getting the right price, preparing and fixing the home for sale, understanding and performing paperwork, and selling within the planned length of time.
NAR mailed an eight-page questionnaire in July 2010 to a national sample of 111,004 home buyers and sellers who purchased their homes between July 2009 and June 2010, according to county records. It generated 8,449 usable responses; the adjusted response rate was 7.9%. All information is characteristic of the 12-month period ending in June 2010 with the exception of income data, which are for 2009. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100%.
For more information, visit www.realtor.org.