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Real Estate Big Data

2020 NAR Report: Breaking down For Sale by Owner (FSBO) homes

(REAL ESTATE BIG DATA) The 2020 NAR Report analyzes how For Sale By Owner (FSBO) sales have been affected in 2020, and what that could mean going into 2021.

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Home owners browsing online for FSBO home selling

At the beginning of 2020, the housing market started off strong. While there was a nine-week downturn at the onset of the pandemic, sales resumed and have continued an upward trend through the rest of the year, resulting in higher prices (jumping 14.6%). This increased demand has been primarily driven by lower mortgage rates and employees working from home (which in turn means a reassessment of where people want to live, with many opting away from cities given that their personal choice is now more easily obtainable).

It has not been entirely beneficial at all times, however, with sales declining for the first time in six months, due to lower inventory and the aforementioned rising costs. Still, this suggests that the market has continued to flourish.

The National Association of Realtors began tracking various trends for home real estate in 1981 with a total of 59 questions designed to understand the market over a twelve month period from July to June. In doing so, a snapshot of the current landscape was obtained for that year, and this data has since been collected annually. Further, it has grown to include additional considerations, covering a massive 131 questions in the most recent 2020 report.

Of the numerous subjects covered, for sale by owner sales (i.e., without assistance from a realtor) are directly profiled. This FSBO information is collected here, and several insights can be gleaned with regard to this particular selling method.

As this report shows, there are certain circumstances that – when tracked across the entire survey – show positive outcomes. A quick example is that not having a previous relationship with the buyer yields higher selling prices and a smaller percentage of times where the asking price was reduced. Interestingly, data also shows a seller’s starting median income being higher than situations where there was a previous relationship with the buyer.

Let’s take a deeper look into this specific topic.

For Sale By Owner Sales Show Steady Decrease Since Inception
In 1981, FSBO sales accounted for as much as 15%, but this has declined gradually over time, accounting for only 8% in 2020 (though this is up 1% from the previous year). Additional analysis showed that these sales were evenly split between the buyers and sellers having a previous relationship versus not, with the latter as generally more advantageous toward the seller. Sales mostly came from suburban and urban locations (as opposed to recreational and resort territories).

FSBO and Agent Assisted Sales 2003-2020
FSBO and Agent Assisted Sales, by Location

Demographics Breakdown – Median Income
In comparison to agent-assisted sales, FSBO owners differ on a number of data points that are significant. For example, FSBO sellers had a median age of 57, which is just above agent-assisted sellers at 56. Further, their median income is over ten thousand dollars lower ($96,700 vs $108,300), which falls even further if an agent was used later in the process after an initial attempt at a self-sale ($79,000).

Interestingly, there is a correlation between higher median seller income when it comes to selling their home to someone where no previous relationship existed ($107,800 versus $84,200).

Characteristics of FSBO and Agent Assisted Sellers

Types of Homes Sold
The majority are detached single-family homes at 81%; there is a small dip to 78% (down from 82% in 2019) with regard to FSBO sales. The main differences here are that FSBO shows a lower percentage of townhouse sales (6% versus 3%) but an increase overall in mobile/manufactured homes (3% versus 9%).

We also still see differences when a previous relationship is not present – there’s an increase in townhouses and mobile/manufactured homes and a decrease in detached single-family. Otherwise, both groups are comparable.

Type of Home Sold, FSBO and Agent Assisted Sellers

Home Location
FSBO sales tend to skew slightly higher in rural areas compared to agent-assisted transactions, though there is a significant difference in resort/recreational sales for those who do not have a prior relationship.

Location of Home Sold, FSBO and Agent Assisted Sellers

Selling Price
Overall, FSBO sales result in a lower median price than with agents ($217,900 versus $295,000), but there has been an increase in the price over 2019 (rising up from $200,000). It’s worth noting that agents will take a percentage of the sale as commission (around 1%). In situations where an agent was employed after an initial attempt at a direct sale, the owner would receive 98% of the asking price, but usually had to reduce their listing before a deal could be made.

In short, this does seem to suggest that an agent’s knowledge of the market and skillset can benefit a seller.

Selling Price, FSBO and Agent-Assisted Sellers

Factors That Determined Selling Price
When settling on an initial listing, FSBOs who knew their buyers tended to focus on comparables in their area 41% of the time. Other methods trailed behind, such as appraisals (32%), profit needed by seller (29%), online evaluation tools (21%), and covering what was owed (15%). Those who did not know their buyer saw an increase when relying on comparables (56%).

How FSBO Seller Determined Asking Price of Home Sold

Length of Time on Market
One of the most important factors in real estate is the amount of time a home will be on the market until it is sold. In this regard, FSBO sales have a slight edge, with an average duration of two weeks (with agents having a median of three weeks). This is increased when the seller knows the buyer, with an average just under a week, rising by 6 points in 2020 to 52%.

As such, homes sold by FSBO tend to move more quickly, and knowing the buyer beforehand accelerates the process.

Time on Market, FSBO and Agent-Assisted Sellers

Remaining Factors – Urgency, Incentives
Compared to agent-assisted sales, FSBO tended to be less urgent overall, with over half saying they did not need to sell urgently regardless of knowing the buyer (52%) or not (64%). There was also a lower tendency to give incentives to the buyer in these conditions, as all FSBO sales offered nothing 85% of the time.

Seller Urgency, FSBO and Agent-Assisted Sellers
Incentives offered to attract buyers, FSBO and Agent-Assisted Sellers

Reason For Selling as FSBO
A majority of owners chose this route due to not wanting to pay a commission or fee, citing this reason as 41% of the time. Selling to a relative, friend, or neighbor was the next most frequent reason, covering 30% of all FSBO sales.

Regardless of why an owner was selling, there was almost always a large disparity between knowing the buyer versus not. This is most pronounced in situations where the buyer contacted the seller directly – 6% of sales versus 22%.

Most Important Reason for Selling Home as FSBO

Method For Selling
Interestingly, a majority of FSBO sales utilized no active methods for marketing their home at 46%, with a large discrepancy between knowing the buyer (68%) versus not (24%). Selling to a friend, relative, or neighbor occurred 22% of the time, while third party aggregators such as Zillow and Redfin were at 24%. Yard signs covered 25%.

When the buyer was not known, the owner relied much more heavily on third parties, social networking sites (such as Facebook), yard signs, and open houses. This would follow given that more work would need to be done to locate a buyer. We can see from the data that third parties are becoming more and more utilized when there is no prior relationship, which would tie into the real estate market becoming more intertwined with digital methods.

Method Used by FSBO Sellers to Market Home

What did FSBO sellers say?
While 8 in 10 successful FSBO sales reported being very satisfied with the process to sell their home. 53% reported that there was nothing truly difficult or arduous when it came to the selling process, which far outshone other reasons such as preparation, completing paperwork, price adjustments, and attracting buyers.

Most Difficult Task for FSBO Sellers

When they knew the buyer, 16% said they would sell their current home when the time arose, while 45% who didn’t know the buyer reported the same. This would suggest that this method is overall successful and attractive, despite that over a third reported not knowing what process they’d take with their current home.

How FSBO Sellers will sell their current home

Conclusion
Both types of sellers were overwhelmingly satisfied with the process they used to sell their homes, with 81% and 83% responding with “very satisfied.” Despite some of the perceived additional challenges and the foregoing of an experienced realtor, it suggests that FSBO works a large part of the time for owners.

FSBO Sellers Satisfaction Process of Selling Homes

With the advent of third parties and social networking, a greater wealth of knowledge accessible via the internet (looking up comparables, recently sold homes, guidance from other home sellers and realtors, etc.), and a rich inventory of resources available, home owners can conceivably move forward with selling their home directly and still enjoy positive results.

Robert Snodgrass has an English degree from Texas A&M University, and wants you to know that yes, that is actually a thing. And now he's doing something with it! Let us all join in on the experiment together. When he's not web developing at Docusign, he runs distances that routinely harm people and is the kind of giant nerd that says "you know, there's a King of the Hill episode that addresses this exact topic".

Real Estate Big Data

After four months of decreasing home sales, there’s a 1.4% blip upwards

(REAL ESTATE) With massive annual gains and slight monthly gains, existing home sales rise 1.4% in June, but the market remains plagued by tight inventory levels.

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home sales

Between May and June, existing home sales (contracts signed) rose 1.4%, after fourth consecutive months of declines and a 22.9% increase from June 2020, per the National Association of Realtors (NAR). The average days on market nationally was only 17 days.

After months (years) of restricted inventory levels, and an entire sector holding their breath for any relief, inventory levels rose 3.3% in June. The market remains blue in the face while holding said breath, but even this slight improvement is a sign of hope.

Meanwhile, the median home price hit $363,300, rising 23.4% over the year, the second highest increase on record since January 1999. All-cash transactions are increasingly common as folks increase their wealth by cashing out of the stock market and/or their housing equity, continuing to nudge out many first-time buyers who rely on traditional mortgage options (despite interest rates remaining historically low).

NAR’s Chief Economist, Dr. Lawrence Yun said, “Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic.”

Dr. Yun noted that home prices won’t decline with still-tight inventory conditions, but expects price appreciation to slow by year’s end. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

Existing home sales in the Northeast rose 2.8% in June, 3.1% in the Midwest, 1.7% in the West, and remain unchanged in the South.

So what’s next for the housing sector with rising prices and restrictive inventory levels?

“NAR continues our conversations with policymakers and leaders from across the industry in an effort to boost housing inventory and increase access to safe, affordable housing for all Americans,” said NAR President Charlie Oppler. “As the nation’s economy continues to recover from COVID-19, securing policies that are in the best interest of U.S. consumers and homeowners remains NAR’s priority.”

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Real Estate Big Data

5 ways AI is shifting real estate and how to capitalize on it

(REAL ESTATE BIG DATA) Artificial intelligence is bringing a seismic shift to commercial real estate in everything from investing to sales to property management. Hold on!

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Woman working at desk with multiple desktops open to AI tools.

Forget about that location thing. Now real estate – especially commercial real estate – is about data, data, data. As in, Really. Big. Data. And AI is owed a large part of the credit for that.

A dizzying amount of data is being crunched and sorted and searched by artificial intelligence-enabled tools that are changing how deals get done and who will still have a job in the future.

The promise of AI to use data to predict the future is massive – and it promises to do that with more accuracy and efficiency, greater productivity, and less cost for commercial as well as residential real estate.

So, what, exactly, can AI do for commercial real estate? Let’s break it down.

What AI is

To put it simply, artificial intelligence is what lets Amazon’s Alexa talk to you and cars drive themselves. Its algorithms use data to mimic human intelligence, including learning and reasoning. Then there’s machine learning, where algorithms analyze enormous amounts of data to make predictions and assist with decision making. We’re putting them both under the same AI umbrella.

There are four main areas where AI is remaking the commercial real estate industry: development and investing; sales and leasing; marketing; and property management.

Development and investing

With its ability to quickly analyze a staggering amount of data, AI lets investors and developers make better data-driven decisions. More responsive financial modeling helps identify ideal use cases and project ROI under multiple scenarios using real-time data. Pulling in alternative data – say, environmental changes or infrastructure improvements – goes beyond traditional data points and can identify investment opportunities, such as neighborhoods beginning to gentrify. In fact, alternative, hyper-local data has become even more important as COVID-19 continues to upend property valuation models.

AI’s crystal ball comes from recognizing patterns in the data and continuing to learn from new information. It can forecast risk, market fluctuations, property values, demographic trends, occupancy rates and other considerations that can make or break a deal.

And it does all of this more efficiently, more accurately and less expensively than manual methods.

Sales and leasing

There’s a big question looming over AI and automation: Will technology put real estate brokers out of business? The short answer is, “No, but brokers need to step up their tech game.”

Keeping up with – and being open to – tech trends is essential. Clients’ ability to use online marketplaces to search for or list property will only grow, but there still is no substitute for expertise and the personal rapport that builds trust. Chatbots can’t negotiate (yet). Robots can’t show a space and weave details about the property into a story. (If you want to know more about using storytelling in real estate, check out this great marketing guide.)

But Big Data is such a powerful tool that brokers need to know how to harness it for themselves. Having more, and more nuanced, data about clients and properties means brokers can better match the two. They can be more confident in setting sales prices and rental rates. Becoming a “technology strategist” to help clients design an automation strategy for a property would be a great value add to their services. Even just starting out with a website chatbot to answer common questions would add a level of tech-savvy efficiency to communication with clients and prospects.

Marketing

Also a boon of Big Data for brokers: more sophisticated, targeted marketing for themselves, as well as for client properties.

Integrating AI with customer relationship management (CRM) tools brings a richer understanding of clients and prospects that can make choosing marketing channels and personalizing targeted content more precise.

Then there’s data-driven lead scoring. Property intelligence firm Reonomy says its commercial data mine – 52 million properties, 100 million companies, 30 million personal profiles, and 53 million tenants – can be searched in multiple ways to create custom prospect lists. (Check out Forbes.com’s “5 Ways Artificial Intelligence is Transforming CRMs” for a fascinating list of what AI can do, including analyzing conversations for sentiment analysis.)

Property and facility management

The Internet of Things (IoT) is already helping property and facilities managers control and predict energy costs, as well as proactively address maintenance issues. Integrating smart technology like thermostats and sensors with AI also means more efficient space planning. Smart security cameras and wi-fi tracking can create “people heat maps” that can identify underutilized or overcrowded areas.

IBM’s TRIRIGA does that and more. Part of the Watson project, TRIRIGA offers AI-driven insights to show how people are actually using a space and ensure a company has the right amount of space in the right areas. It can also analyze common questions from a chat log, then use that data to create an AI virtual assistant to automatically answer those questions – and update itself as it learns new data. Maintenance requests, room reservations and more can be fully automated.

Strategic space planning has become even more important during the pandemic, as work-from-home trends and safety concerns reshape offices as workers return. (Need ideas for your office? IBM’s Returning to the Workplace guide might be a good place to start.)

Barriers to adoption

There’s no question tech-enabled commercial real estate companies will have a competitive edge. The question is, when will more of them agree enough to adopt AI more widely?

PropTech with and without AI has exploded over the past few years – and that’s part of the problem. In an Altus Group survey, 89% of CRE executives said the PropTech space needs significant consolidation before it can effectively deliver on industry needs; 43% said that is already underway or will occur within 12 months.

Then there’s the undeniable learning curve that comes with any tech tool – an investment of time as well as money. The survey also showed concerns about regulatory requirements for data collection and management, having enough internal capacity, and nonstandard data formats.

Despite those perceived barriers, there’s also no question that innovation and disruption from AI are moving at a dizzying pace – and that commercial real estate needs to keep pace.

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Real Estate Big Data

Home sales slip for fourth consecutive month, yet spike annually

(REAL ESTATE) While murmurs of a housing bubble permeate the market, home sales slide and inventory levels remain wildly restrictive.

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Home sales: House sellers prepping home with For Sale sign out front

Despite bidding wars in many areas of America, existing home sales dipped 0.9% from April to May, according to the National Association of Realtors (NAR), marking the fourth month in a row of small declines. Meanwhile, amidst fears of a housing bubble, all regions saw double digital annual gains.

Sales are “approaching pre-pandemic activity,” said NAR’s Chief Economist, Dr. Lawrence Yun. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”

“The market’s outlook, however, is encouraging,” Yun continued. “Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes.”

MBA AVP of Economic and Industry Forecasting, Joel Kan also sees a silver lining. He said, “One positive development was the 7 percent increase in for-sale inventory, which should slightly help price conditions.”

The median home price in May rose 23.6% over the year to $350,300, a record high and the 111th consecutive month of year-over-year gains.

The average days on market was unchanged for the month, remaining at 17 days, down from 26 days in May 2020. Fully 89% of homes sold in the month were on the market for less than 30 days.

Dr. Yun expects the 30-year fixed rate mortgage to remain below 3.5% in 2021, with a rate of 2.96% in May, down from 3.06% in April, according to Freddie Mac.

In the Northeast, sales fell 1.4% in May, but skyrocketed 46.9% from May 2020. The median price rose 17.1% annually to $384,300.

The Midwest experienced a 1.6% uptick for the month, and 27.2% for the year. The median price rose 18.1% for the year to $268,500.

In the South, sales slid 0.4%, up a whopping 47.2% from May 2020. Here, the median price rose 22.6% to $299,400.

Finally, home sales in the West declined 4.1% for the month, but saw a 61.6% increase from the previous May. Sale prices rose 24.3% over the year to $505,600.

NAR recently called on lawmakers to take “immediate” and “once-in-a-generation” action regarding the current housing supply crisis, so we’ll be watching for how the market is impacted in coming months.

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