Connect with us

Real Estate Big Data

How a COVID-19 vaccine could upend the housing market (again)

(REAL ESTATE BIG DATA) COVID-19 completely changed the trajectory of the housing market, but the promise of a vaccine could pull it back around in another direction.

Published

on

A house at dusk with lights illuminated, favored by housing market.

According to CNN Business, “the coronavirus pandemic dramatically changed the landscape of the housing market.” In many expensive urban housing markets, such as Manhattan and San Francisco, vacancy rates are high as people are moving to the suburbs; rents are low in these markets because workers are free from their office jobs.

When combined with low interest rates, this is putting a higher demand on homes in less populated markets. Many people are watching the real estate market closely as vaccines on the horizon promise a return to normal. How could the housing market be affected?

Homeowners still want to work from home to enjoy their sanctuary

The coronavirus reminded people how important home life was. Working from home eliminated commutes and gave workers back some of their time. Even with all the complications of working from home, buyers are looking for homes with a big backyard and space for a home office.

In the Dallas market, starter homes are high in demand. In urban markets that are more expensive, second homes in the rural areas are popular.

People should return to urban areas

As the vaccine gives Americans a return to normal, people will return to the big cities. CNN Business reports that the vacancy rate in Manhattan is 6.14%. Median rental prices are down almost 15% over last year.

As the pandemic comes to an end, it may be a renter’s market until the Fortune 500 companies bring people back to work. A vaccine could also lead to non-US buyers returning to the market, which would make the market more stable.

The vaccine could reverse mortgage rates

Some economists believe that the interest rates will continue to decline, but others suggest that a vaccine could switch the trend. Even so, Marketwatch predicts that many homeowners will still refinance as rates go. Homes will still be in demand, leading to a surge in the housing market.

In fact, a vaccine could mean that more homes will go on the market. Homeowners who hunkered down to ride out the pandemic could be more willing to host open houses and make a move themselves. A vaccine could contribute to supply, which will help buyers get better deals.

The Austin market is strong

Residential sales in the Austin area have increased by 31.5% over last year. Prices have also surged. The median price of a home in Austin’s city limits was $435,000 in August. Sales are expected to slow as supply dwindles. Inventory is limited because people are choosing to stay in their homes. Competition for homes on the market is high, driving prices even higher.

A vaccine is promising for the real estate market

A vaccine should even out the market, but without a crystal ball, it’s hard to know what will happen. Record sales in the Texas market certainly weren’t predicted to be an outcome of a pandemic. It will take time for the economy to level out and for people to get back to work in the entertainment and restaurant industry. How the vaccine impacts the market may depend on location, just as it always has.

Dawn Brotherton is a Staff Writer at The American Genius, and has an MFA in Creative Writing from the University of Central Oklahoma. Before earning her degree, she spent over 20 years homeschooling her two daughters, who are now out changing the world. She lives in Oklahoma and loves to golf. She hopes to publish a novel in the future.

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.

Published

on

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.

Continue Reading

Real Estate Big Data

NAR Report: Despite tech, agents connection and trust ranks high

(REAL ESTATE BIG DATA) Even as technology is transforming the real estate industry, home sellers are seeking agents with personal connections, trust, and a high level of service.

Published

on

Agents sitting at a table negotiating a deal

When it comes to how sellers and real estate professionals and agents are working together these days, surveys say things are going pretty well.

For its updated relationship check in, the National Association of Realtors asked recent home sellers who closed from July, 2019, through June, 2020, about how their sales process went.

Here are some of the main takeaways from NAR’s “2020 Profile of Home Buyers and Sellers.”

It’s still all about referrals and personal networks.

Asking friends, family, or relatives to recommend an agent – or knowing their agent personally – is by far the most common way sellers find someone to work with. Furthermore, 67% of all sellers either got a recommendation for, had a personal relationship with, or had previously worked with the agent. Referrals and relationships were the most common for first-time sellers, at 46%; for repeat sellers, 28% chose based on past experience.

Method Used to Find Real Estate Agent, by First Time or Repeat Seller

Sellers aren’t shopping around much.

Perhaps related to the high number of people who were referred to or knew their agent, 77% of recent sellers talked to just one agent before making a decision; 13% contacted two.

Most sellers who stayed nearby used the same agent to buy their next home.

While 54% of sellers overall used the same agent, there was a big difference when comparing that to the number of miles sellers moved away: More than 80% of sellers who moved 20 or fewer miles away used the same agent. The majority of sellers who moved more than 50 miles away chose a different agent.

MLS is even bigger in marketing, but yard signs are still popping up.

When it came to marketing, 91% of sellers said their homes were listed on the Multiple Listing Service (MLS), an increase from 2019, NAR notes. Only 2% of sellers surveyed stayed off MLS.

Among sellers who worked with an agent, 88% reported being on MLS. Agents also posted yard signs (68%) and held an open house (53%). Online listings on realtor.com, the agent’s own website, and third-party aggregators were used about half the time. Only 22% of agents posted listings on social media.

When it comes to marketing, however, the 2020 report also shows changing trends in strategies spurred by the onset of the COVID-19 epidemic. In the period from April through June, 2020, the use of open houses fell by 12 percentage points, while virtual tours and videos climbed by 16 points. Buyers are now doing more research on their own and touring fewer properties.

Methods Real Estate Agent Used to Market Home

Agents are providing more services than ever before.

NAR also looked at how much sellers asked their agents to do, from selling the house within a certain timeframe to pricing, negotiation, marketing, help with paperwork, and more.

According to the report, “88% of sellers reported that their agents provided the lion’s share of these services, the highest historical share recorded.” From 2006 to 2019, the average was 81% of sellers saying their agents provided a broad range of services, but that’s been climbing every year since 2017.

Only 6% of sellers said they had asked agents to provide a limited list of services. The same percentage applied to sellers who said they just wanted the agent to list on MLS and little else.

Level of Service Provided by the Real Estate Agent

The top services all sellers wanted was help selling their home within a specific timeframe (22%) and help pricing the home competitively (21%). However, how sellers ranked services differed depending on how much they had asked agents to do. The previous percentages were reversed for sellers whose agents provided a range of services and managed the sales process. For sellers who asked agents to provide limited services on request, the most important service was help finding a buyer. For those who just wanted the agent to list on MLS, sellers most wanted help with marketing.

What Sellers Most Want from Real Estate Agents, by level of service provided by the Agent

A good reputation and integrity get clients.

When it came to 31% of sellers, they said an agent’s reputation was the most important factor in choosing an agent. For 26%, the most valued trait was trustworthiness and honesty. For 15%, the most important consideration was that the agent was a friend or family member.

Most Important Factor in Choosing Real Estate Agent to Sell Home, by level of service provided by the agent

Sellers paying commissions is still standard.

When it comes to paying agents, it still falls on the seller’s shoulders. Seventy-seven percent of agents were paid by sellers alone, while 11% were paid by the buyer and the seller, and 6% were paid only by the buyer. Only 3% of sellers paid a flat fee.

It falls mostly to the agent to get that conversation started. For 41% of sellers, they said their agent brought it up, but 23% of sellers said they had brought it up and were able to negotiate the commission or fee. Not everyone asked, though. When it came to 28% of sellers, they either knew compensation was negotiable but didn’t ask or didn’t even know that was possible. Only 5% of agents were not willing or able to negotiate.

Negotiating the Commission Rate or Fee with the Real Estate Agent

Sellers gave their agents high marks.

While every agent wants a 100% satisfaction rating from clients, the 89% of sellers who said they would “definitely” or “probably” return to or recommend their agent isn’t too shabby. Satisfaction with agents was highest for those who helped sellers buy homes within 20 or fewer miles.

For many agents, that satisfaction turned into referrals. Although 33% of sellers reported no referrals, 41% had recommended their agent from one to three times, while an enthusiastic 27% had done so four or more times. The median number of times sellers made recommendations was two.

Continue Reading

Real Estate Big Data

NAR Report: The connection between home owners and financing

(REAL ESTATE BIG DATA) Financing a home purchase or an existing home is an exciting step. This NAR report gives us insight into what may be inhibiting home buyers.

Published

on

The yearning to own your own home has been and still is something people really want. According to the most recent Profile of Home Buyers and Sellers report by The National Association of Realtors® (NAR), data shows first-time and repeat buyers are still financing homes. The survey, which “allows industry professionals to gain insight into detailed buying and selling behavior” since 1989, surveyed buyers and sellers who purchased between July 2019 to June 2020.

How much do home buyers finance?

The NAR report shows 87% of all home buyers financed their home in 2020. This is up 1% from last year. First-time buyers are more likely to finance their homes more than repeat buyers with 95% and 83%, respectively.

Buyers who financed their home purchase, by adult composition of household

Also, 14% of all home buyers financed 100% of the entire cost of their home using a mortgage. First-time buyers’ median percent of finance was 93%, and it was 84% for repeat buyers. Overall, the median percent of finance for all buyers was 88%.

Percent of Home Financed by First-Time and Repeat Buyers, and Buyers of New and Previously Owned Homes

Does everyone put 20% down?

According to the NAR report, the median down payment for all home buyers was 12%. Among first-time buyers, it was 7%, it was 16% for repeat buyers. For the most part, down payments have either gone down or stayed about the same since 2005.

Median Percent Downpayment of First-Time and Repeat Buyers, 1989-2020

Over half (58%) of recent home buyers said they used their savings for financing their home purchase. This is a 2% decrease from last year but is still higher than the historical norm of 55% since 2000. Also, 38% of homeowners said they used proceeds from the sale of a primary residence to finance their new home, the same as last year.

For repeat buyers, 54% cited using proceeds from their previous sale to finance their new home. In 2014, it was 47%, and 25% in 2012. The high increase could be due to the increase in property values over time. On the other hand, 79% of first-time buyers used savings, and 22% used a gift from family or a friend to finance their home.

Sources of Downpayment, first-time and repeat buyers

Home Buying Obstacles

For 24% of home buyers, some sort of debt was cited as a reason for having to delay purchasing a home. Home buyers waited a median of 3 years to save for a down payment and lower debt before buying a home.

Years Debt Delayed Home Buyers from Saving for Downpayment or Buying a Home

For home buyers, 11% said saving for a down payment was the most difficult step in the home buying process, down 2% from last year. Expenses that made it difficult to save were student loans (47%), high rent or current mortgage payment (43%), and credit card debt (36%). To make a purchase, some home buyers made financial sacrifices like reducing spending on luxury or non-essential items (23%) and cutting entertainment spending (15%).

Expenses that delayed saving for a downpayment or saving for a home purchase, by adult composition of household

Is purchasing a home a good financial investment?

According to the NAR report, 83% of home buyers did view buying a home as a good investment, and 42% said it was even better than owning stock. Also, 85% of first-time buyers see it as a good financial decision compared to 82% of repeat buyers. For unmarried couples, it was 86%.

Buyers' View of Homes as a Financial Investment, first-time and repeat buyers, and buyers of new and previously owned homes

Overall, the NAR report shows first-time and repeat buyers are still financing to purchase a home. Repeat buyers tend to put more money down on a house using money from a previous home sale. First-time buyers tend to put less money down and use their savings. And, debt is without a doubt, the reason why most buyers delay purchasing a home.

Continue Reading
Advertisement
Advertisement

Our Partners

Get The Daily Intel
in your inbox

Subscribe and get news and EXCLUSIVE content to your email inbox!

Still Trending

Get The American Genius
in your inbox

subscribe and get news and exclusive content to your email inbox