Study: home buyers cite concern over low inventory levels

Home buyer survey results

According to a new quarterly survey by Redfin.com, of people planning to buy in the next year, over half are already under contract on a purchase or planning to be under contract within the next three months, citing expectations of flat housing prices and low interest rates. Redfin reports that over half expect prices to rise in 2013 from 2012 levels, with only 10 percent expecting continued price decreases.

The company received feedback from 1,457 people who had toured a home with a Redfin agent since January 1st across 19 major metropolitan areas, with a consensus that affordability in the form of low interest rates and low home prices are the top drivers for today’s buyers, but they fear low inventory levels. Many respondents expressed frustration at the condition of distressed listings and frustration over negotiating with a bank.

According to Redfin, “The concern about inventory isn’t just a by-product of survey wording. When we asked a free-form question about what surprised our customers the most this year, more than 30% commented on low inventory. Many customers focused on how suddenly the laws of supply and demand tilted away from buyers:

• Multiple offers started appearing from the beginning of this year, January in fact, compared to November and December last year.
  Sudden demand. I think increased buyer confidence is driving prices up and even starting bidding wars.
• There’s a palpable new climate now, with seemingly many motivated buyers ready to buy. Nearly everything I see go up–good or just ok–is moving very quickly.
• What our own agents have noticed is that competition has come not just to picture-perfect cottages in desirable neighborhoods but also run-of-the-mill listings. Many homes that failed to sell last fall are just now being re-listed, often only at a nominally different price — $5,000 less for example — and then going under contract the week of their debut.”

The shifting American Dream

Redfin CEO, Glenn Kelman expressed surprise that a third of all respondents “were pursuing the American Dream alone,” in light of his “reading so much about the fragmentation of the American family.” While 67 percent intend to buy a home with a spouse, 15 percent intend to buy alone and live alone, 11 percent plan to buy alone yet live together, and 3 percent intend on purchasing with roommates (and another 3 percent said other).

During their home search, most responded that they were currently renting an apartment or someone else’s house, with Redfin noting that “The high proportion of renters among our customers may just reflect the tendency of Redfin’s buyers to be young.” Kelman added, “But I think it also shows that in a market in which prices may be near a bottom, the people who want to buy the most are the ones who don’t also have to sell. My guess is that there is probably a broader youth movement among American home-buyers.”

Kelman reports that despite Americans underwater is roughly 25 percent, under 1 percent of respondents had a foreclosure or short sale in their history, opining that “it will take many years for these would-be home-buyers to come back. When they do come back, we’ll let you know.”