Tight credit lingers, impacts home buyers
According to the 2013 National Association of Realtors Profile of Home Buyers and Sellers survey, while housing has been recovering for the past two years, restrictive mortgage lending standards are preventing some financially qualified buyers from reaching their dreams, especially singles and first-time buyers.
NAR Chief Economist, Dr. Lawrence Yun said, “Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores.”
Dr. Yun notes that the survey does not reflect the elevated level of investors in recent years, without which the housing recovery would have been much weaker since this segment often purchases with cash and are not impacted by tight credit conditions.
Mortgage interest rates will continue to rise
“Given that mortgage interest rates are expected to gradually rise, we need greater access to credit for a sounder housing recovery. Affordability conditions remain favorable in much of the country, but consumers need access to safe and sound financing, particularly the 30-year fixed-rate mortgage, and with low downpayment options for first-time buyers,” Dr. Yun said.
First time buyers
NAR’s Economist notes that at 38 percent of all home purchases made this year, the share of first time buyers is only modestly below the 32 year average of 40 percent, “but we have to keep in mind that investors have been more active in recent years, and they’re not included in these results.”
“Historically, first-time buyers are instrumental in housing recoveries because they help existing home owners sell and make a trade,” said Dr. Yun.
Who is buying?
In 2013, NAR reports that the median age of first-time buyers was 31, unchanged from 2012, and the median income was $67,400.
The typical first-time buyer purchased a 1,670 square-foot home costing $170,000, while the typical repeat buyer was 52 years old and earned $96,000.
Repeat buyers purchased a median 2,060-square foot home costing $240,000.
When asked about the primary reason for purchasing, 60 percent of first-time buyers cited a desire to own a home of their own. For repeat buyers, 16 percent wanted a larger home, 12 percent had a job-related move and another 12 percent said they just wanted to own a home of their own.
Methods of payment
NAR reports that 90 percent of buyers financed their purchase, and the median down payment ranged from five percent for first time buyers to 14 percent for repeat buyers.
First time buyers came up with this down payment by tapping into savings (78 percent), through a gift from a friend or relative (27 percent), by selling stocks or bond (9.0 percent), tapping into their 401(k) fund (8.0 percent), or through a loan from family or friends (7.0 percent). Fully 95 percent chose a fixed-rate mortgage, 40 percent financed with a low down payment FHA mortgage, and 8.0 percent used the VA loan program with no down payment requirements.
This pool of buyers said saving for a down payment was difficult, with 54 percent of those respondents noting that student loan expenses delayed their savings.
NAR reports that 80 percent of home buyers believe their home is a good investment, 44 percent saying it’s better than stocks. Additionally, 91 percent were satisfied with the buying process.
Using a Realtor and home shopping online
The typical buyer began their home search online and then contacted a real estate agent. Buyers searched a median of 12 weeks and visited 10 homes.
To search for a home, 92 percent began the hunt online, 89 percent used real estate agents, 51 percent yard signs, 45 percent each attended open houses and used a mobile application, and 42 percent used mobile search engines.
When buyers were asked where they first learned about the home they purchased, 43 percent said the web, 33 percent from a real estate agent, 9.0 percent a yard sign or open house, 6.0 percent from a friend, neighbor, or relative, 5.0 percent from home builders; 2.0 percent directly from the seller; 1.0 percent a print or newspaper ad; and less than 1.0 percent from other sources.
Ninety percent of home buyers who used the Internet to search for a home purchased through a real estate agent, as did 69 percent of non-Internet users, who were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.
While sellers had been in their previous home for a median of nine years, first time buyers plan to stay for 10 years and repeat buyers plan to hold their property for 15 years.
Factors for choosing a home
NAR says the biggest factors influencing neighborhood choice were quality of the neighborhood, cited by 63 percent of buyers; convenience to jobs, 48 percent; overall affordability of homes, 40 percent; and convenience to family and friends, 38 percent. Other factors with relatively high responses included quality of the school district, 29 percent; neighborhood design, 28 percent; convenience to shopping, 26 percent; convenience to schools, 22 percent; and convenience to entertainment or leisure activities, 20 percent.
Commuting costs remain a significant factor, with 73 percent of buyers saying transportation costs were important in the purchase decision process.
“Green” features also played a role, with 85 percent saying heating and cooling costs were important, and 68 percent wanting energy efficient appliances.
Types of homes purchased
The survey indicates that 80 percent of respondents purchased a detached single-family home, 7.0 percent a condo, 7.0 percent a townhouse or rowhouse, and 6.0 percent some other kind of housing. The typical home had three bedrooms and two bathrooms.
Additionally, 53 percent of recent purchases were in a suburb or subdivision, 18 percent in a small town, 16 percent were in an urban area, 11 percent in a rural area and 3 percent in a resort or recreation area. The median distance from the previous residence was 12 miles.
Fully 88 percent of respondents used real estate agents and brokers to purchase a home, 7 percent purchased directly from a builder and 5 percent directly from the previous owner; 61 percent of buyers working with real estate professionals had a buyer representative arrangement.
Home seller demographics
The typical home seller was 53 years old and their income was $97,500. Sellers moved a median distance of 18 miles and their home was on the market for 5 weeks, down from 11 weeks in the 2012 study. Fully 45 percent moved to a larger home, 27 percent bought a comparably sized home and 29 percent downsized. In 2013, 13 percent of sellers wanted to sell earlier but were stalled because their home had been worth less than their mortgage.
The typical seller, who purchased a home nine years earlier, realized a median equity gain of $25,000, a 13 percent increase over the original purchase price, while sellers who were in their homes for 11 to 15 years saw a median gain of $52,000, or 28 percent.
Sellers typically found a real estate agent through a referral by a friend, neighbor or relative, or used the agent in a previous transaction, together cited by 63 percent of respondents; 83 percent are likely to use the agent again or recommend to others.
Like sellers, buyers most commonly choose an agent based on a referral, or had used the agent previously, mentioned by 54 percent of respondents, with trustworthiness and reputation being the most important factors; two out of three buyers interviewed only one agent. Eighty-six percent of buyers are likely to use the same agent again or recommend to others.
Of sellers working with real estate agents, the study found that 81 percent used full-service brokerage, in which agents provide a broad range of services and manage most of the aspects of selling a home. Nine percent of sellers chose a limited set of services, and 10 percent used minimal service, such as simply listing a property on a multiple listing service.
Realtors provide all of these types of services, as do non-member agents and brokers, with similar findings for each year since questions about brokerage services were added in 2006.
For Sale By Owner transactions
For-sale-by-owner transactions accounted for 9.0 percent of sales, matching the record lows set in 2010 and 2012; the record high was 20 percent in 1987. The share of homes sold without professional representation has trended lower since last reaching a cyclical peak of 18 percent in 1997.
Factoring out private sales between parties who knew each other in advance, the actual number of homes sold on the open market without professional assistance was 6 percent. In 2013, 12 percent of all FSBOs said they had been contacted directly by a buyer and were not actively attempting to sell their home.
The median sales price for owners who used an agent was $230,000, well above the $184,000 median for a home sold directly by an owner, but there were important differences. The median income of FSBOs was $86,200, in contrast with $99,900 for agent-assisted sellers, and they were more likely to be selling a smaller home, suggesting a lower home value for unassisted sellers.
The most difficult tasks reported by FSBOs are getting the right price, preparing or fixing up the home for sale, and understanding and completing paperwork.
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
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