FSBO transactions are at an all-time low, as 90 percent of home buyers and sellers used a real estate agent, according to the 2015 National Association of Realtors Profile of Home Buyers and Sellers.
The report is chock full of mixed news, unveiling that most buyers end up finding the home they purchase through an agent (not a website), while first-time buyers declined to a worrisome point. The report also indicates that tight inventory conditions have plagued the industry, yet has sped up the time it takes for a buyer to find their home.
For 34 years, NAR has profiled buyers and sellers and evaluated the demographics, preferences, motivations, plans, and experiences of recent home buyers and sellers (owner-occupants).
First time buyers remain a point of concern
For the third consecutive year, the share of first-time buyers declined to 32 percent (down one percent from 2014), hitting the second-lowest share since reporting began. The historic average is 40 percent of purchases.
Dr. Lawrence Yun, NAR Chief Economist, says the housing recovery’s missing link continues to be the absence of first-time buyers.
“There are several reasons why there should be more first-time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college-educated, and the fact that renting is becoming more unaffordable in many areas,” said Dr. Yun.
He adds, “Unfortunately, there are just as many high hurdles slowing first-time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there’s scarce inventory for new and existing-homes in their price range, and it’s still too difficult for some to get a mortgage.”
For the first time, we understand why
Yun says this year’s survey perhaps offers additional clues to why fewer first-time buyers are reaching the market. “First-time buyers reported that debt (all forms) delayed saving for a down payment for a median of three years, and among the 25 percent who said saving was the most difficult task, a majority (58 percent) said student loans delayed saving,” he said.
“With a median amount of student loan debt for all buyers at $25,000, it’s likely some younger households with even higher levels of debt can’t save for an adequate down payment or have decided to delay buying until their debt is at more comfortable levels.”
More married couples in the market
Most markets saw rising home prices and fewer first-time buyers in the market, so it makes sense that the share of buyers that are married rose to 67 percent (up from 65 percent in 2014). They have higher household income than previous years, with married repeat buyers taking the top spot for highest income among all buyers ($108,600).
The share of single female buyers fell from 16 to 15 percent (sorry, Beyonce), and single male buyers remained at 9.0 percent.
“Similar to some of the obstacles facing first-time buyers, tighter credit conditions and having less purchasing power than households with dual incomes likely led to the share of single-female buyers declining to its lowest since 2001 (also 15 percent),” noted Dr. Yun.
First time buyers vs. repeat buyers
While the median age of first-time buyers remains 31, repeat buyers’ average age is 53 years old.
First-time buyers’ median income is $69,400 (up from $68,3000 in 2014), while repeat buyers average $98,700 (up from $95,000 in 2014).
Repeat buyers purchased a median 2,020sf home costing $246,400 while first-time buyers purchased a 1,620sf home costing $170,000.
Why did buyers buy this year?
The report indicates that buyers continue to see buying a home as a good financial investment, up one percent from last year to 80 percent. Fully 43 percent believe it’s better than stocks.
The desire for first-timers to own their own home surged this year, with 64 percent saying it was their primary reason for purchasing, up 11 percent from last year.
Repeat buyers typically bought not only because they want to own (13 percent), but to own a larger home (13 percent).
Roughly half of all buyers said that the timing was “just right” and that thy were simply ready to purchase a home.
Looking ahead, first-time buyers plan to stay in their home for 10 years and repeat buyers plan to hold their property for 15 years.
How buyers found their home
More buyers used the web as the first step of their search (42 percent), four out of five buyers who searched for homes online ended up purchasing through an agent.
NAR President Chris Polychron, says the two most popular resources used during the home search process continue to primarily be online websites (89 percent) and real estate agents (87 percent).
“Although buyers between the ages of 18-24 were the most likely to use an agent (90 percent), over 85 percent of buyers in each of the other age categories also used an agent during their home search,” observed Polychron.
“With tight inventory conditions leading to stiff competition in several parts of the country and what’s found online sometimes not entirely accurate, buyers are turning to Realtors® for expert advice and assistance in navigating today’s fast-moving housing market,” he added.
Home searches done on mobile or tablet applications surged from 45 percent in 2013 to 61 percent this year, with yard signs and open houses remaining relevant to the home search process at 51 and 48 percent respectively.
More buyers moving to the burbs
The average home bought this year was a 3-2, built in 1991. A detached single-family home remains the most common type of home purchased at 83 percent, and townhomes remaining at 7.0 percent.
Of note, the report indicates that more buyers are moving to the burbs (52 percent, up two percent from last year), with 20 percent buying in a small town, 14 percent in an urban area, 13 percent in a rural area, and 2.0 percent at a resort/recreation area.
Recent buyers also moved further from their previous residence this past year at a median distance of 14 miles (12 miles in 2014).
Motivations behind neighborhood selection
The report indicates that like in years past, what motivates people to choose a neighborhood is the “quality of the neighborhood” at 59 percent. Convenience to jobs ranked second at 44 percent, and overall affordability at 38 percent.
Unmarried couples were the most likely to cite convenience to entertainment and leisure activities (26 percent), and single women were the most likely to cite convenience to friends and family as an influencing factor (43 percent), notes the report.
Let’s talk about sellers
Most homes this year were sold with an agent (89 percent), with FSBOs hitting their lowest share (8.0 percent) since reporting began in 1981.
“Although the Internet and digital technology have created several channels for sellers to market their listings to a wider cast of potential buyers, the preference to use a Realtor® to sell a home has never been stronger,” said Polychron.
The typical seller is 54 years old, married, earns $104,100, and were in their home for nine years before selling.
The age is up five years from 2010, and household income rose $7,400 from last year. The average time in a home before selling sped up by one year compared to 2014.
Time on the market remains at four weeks
According to NAR, “Fewer sellers this past year (14 percent) wanted to sell earlier but were stalled because their home had been worth less than their mortgage (17 percent a year ago).”
This year, sellers realized a median equity gain of $40,000 (up nearly $10k in one year). The median time on market remained at four weeks and sellers moved a median distance of 20 miles, typically because their home was too small.
Referrals for listing agents still rule
NAR notes that “A combined 66 percent of responding sellers found a real estate agent through a referral by a friend, neighbor or relative, or used their agent from a previous transaction.”
Client referals and repeat business remains the primary source of business for all real estate agents, with most sellers (84 percent) noting they would definitely (67 percent) or probably (17 percent) recommend their agent for future services.