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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.

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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.

Veronica Garcia has a Bachelor of Journalism and Bachelor of Science in Radio/TV/Film from The University of Texas at Austin. When she’s not writing, she’s in the kitchen trying to attempt every Nailed It! dessert, or on the hunt trying to find the latest Funko Pop! to add to her collection.

Real Estate Big Data

Home sales dip in December, yet saw the highest annual bump since 2006

(REAL ESTATE) Despite rising mortgage rates and tightening underwriting standards, home sales jumped annually at a rate not seen since before the crash.

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existing home sales

Existing home sales dipped 4.6% in December from November after three consecutive months of gains, according to the National Association of Realtors (NAR). But it’s not all bad news as the trade group explains that overall sales for the year were actually up 8.5% from 2020, and hit the highest annual level since 2006.

Weather typically pulls sales down in December, but what is interesting in this most recent data is that inventory levels hit an all-time low since reporting began in 1999. The pressure on the market from tight inventory of unsold existing homes has plagued the market in recent years as NAR has continued to emphasize.

“December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing,” said Dr. Lawrence Yun, NAR’s chief economist. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”

Dr. Yun expects existing home sales will continue to slow a bit, given rising mortgage rates, but indicates that employment gains in a tight labor market, and increasingly strict underwriting standards insure sales levels are not in danger of crashing.

“This year, consumers should prepare to endure some increases in mortgage rates,” Dr. Yun cautioned. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”

As inventory levels tighten even more, Dr. Yun warns that although homebuilders are increasing supply, “but reversing gaps like the ones we’ve seen recently will take years to correct.”

He’s bullish on home sales and employment gains, but is not exactly observing an overly glowing picture of the market, given the lingering crisis with lagging housing starts.

Home sales fell in all regions (1.3% in the Northeast and Midwest, 6.3% in the South, and 6.8% in the West), and prices rose rose in all ares (up 8.4% annually in the West, 6.3% in the Northeast, 10% in the Midwest, and a whopping 20.2% in the South).

“We wrapped up the year witnessing home sales exceed the previous year’s total and saw millions of families secure housing,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “I think the positive momentum will continue as the market prepares to finally see more supply in the coming months, meaning more buyers will be able to land their dream home.”

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Real Estate Big Data

Real estate myths created during the pandemic

(REAL ESTATE DATA) Real estate is a finicky field, but the most popular myths surrounding the effects of COVID-19 on the market are purely unfounded.

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real estate myths

Since the pandemic spread across the globe, misinformation regarding the Coronavirus, its treatment, and the long-term ramifications of a pandemic has been widespread. This phenomenon that has affected, among other industries, real estate.

As practitioners, here are a few myths you’re likely to experience in the current market.

The first mythand, arguably, the most prevalent oneasserts that selling your home amidst COVID-19 restrictions is a poor choice.

In fact, the opposite is true: Danielle Hale, a real estate expert, explains that people have been able to sell at relatively high rates despite the pandemic. “As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” she adds.

Of course, both taking the proper precautions during showings and maintaining social distancing–along with affording buyers an appropriate amount of grace when settling on a closing date–are important attributes of making a successful sale during this time.

Another myth you’ll probably hear about is tangentially connected to the first–that home prices are declining, thus making it, again, a bad time to sell. This is simply untrue; Lawrence Yun of the NAR points to low mortgage rates, as well as a general lack of people selling during this time, as the culprit. It makes sense that people would want to protect their investments for the time being, after all.

Thirdly, and lastly in the buying-and-selling myth pantheon, you’ll find that people are actually buying houses more now than they were before the pandemica direct answer to the myth that buyers are hesitant to close on properties for now. Just like the last item, you can look to low interest rates and high demand as the justification here.

Then, there is the myth that you can no longer tour homes in person seems real enough, and it may be standard practice for some sellers; however, the majority of homes being sold in the United States, as of now, are viewable in personand, more importantly, with the viewer’s safety at the forefront of the seller’s endeavors. However, SFGate does point out that, due to rising cases in much of the United States, some of these restrictions may eventually return.

Finally, the myth that buyers are actively attempting to leave cities in favor of suburb living seems to be circulating as of late. SFGate acknowledges that this myth is “partly true”, but that doesn’t mean city listings aren’t availablenor does it mean city dwellings will begin to lose their value. After all, urban living has consisted of largely prime real estate for as long as any of us can remember, and the Coronavirus probably won’t outlast that allure.

The bottom line is this: Real estate, like everything else, has been affected by COVID-19but it hasn’t been completely turned on its head and wiped out like some may think.

This story was first published July 31, 2020.

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Real Estate Big Data

Super simple shortcut to attract new (or more) real estate investors

(REAL ESTATE BIG DATA) Without having to spend any money, this shortcut can attract more business to boost your bottom line with real estate investors – a win-win for the nation.

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Whether you’re a real estate veteran, or looking to expand your services to the real estate investment world, a wild shortcut has just been launched, and you already have access to it for free if you’re a Realtor.

Realtors Property Resource (owned by the National Association of Realtors (NAR)), rolled out a map layer to unveil the Qualified Opportunity Zones (QOZ) across the nation this year, and it’s a tool we should all be using regularly…

The QOZ program was created in 2017 as part of the Tax Cuts and Jobs Act and is designed to improve local economies (specifically the economically disadvantaged areas) through long-term investments with real estate investors.

There are 8,700 QOZs in America, and real estate investment and development in those areas are rewarded with tax incentives (potentially reducing their tax liability by 10-15%, and appreciation on the investment is tax free if held for at least 10 years).

And now, you can find the investment opportunities in seconds, generate reports for investors, connect with homeowners (via the “Mailing Labels” feature) in those areas, and so much more – the new RPR features combine to create one hell of a shortcut for you. Check it out:

Opportunity Zones

This is “Opportunity Zones” by Realtors Property Resource® on Vimeo, the home for high quality videos and the people who love them.

“With the Opportunity Zone initiative poised to transform American communities that have long been shunned by investors, NAR has developed resources to help facilitate and expedite investments in these areas. As our work continues, REALTORS® are committed to ensuring Americans can take full advantage of this valuable new initiative”, said Joseph Ventrone, NAR Vice President, Federal Policy and Industry Relations.

“These Opportunity Zones encourage private investment into low-income communities, with the intent of stimulating economic growth and job creation,” said Bob Turner, NAR’s 2019 Commercial Liaison and RPR Advisory Council Member. “Residential practitioners will notice homes that fall within Opportunity Zones gain a boost to their marketability because of increased attention, while Commercial practitioners will likely see properties once being skipped over turn into desirable investment opportunities.”

It’s not just a shortcut for practitioners and real estate investors, but meaningful help for underserved areas. Talk about a real win-win.

This story was first published July 31, 2019.

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