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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.

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Agents sitting at a closing 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.

Real Estate Big Data

Median home prices hit $407K, home sales fall 3.4%

(REAL ESTATE NEWS) Home sales dip for a fourth consecutive month in May – what does this mean for the housing market going forward?

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home sales

For the fourth consecutive month, existing home sales (real estate contracts signed) fell 3.4% in May from April, and slumped 8.6% from a year ago, according to the National Association of Realtors (NAR). The average days on market fell from 17 days in April (and May 2021) to 16 days in May, and 81% of all homes listed sold in under a month.

The median home price rose 14.8% over the last year to $407,6000, the first time it has ever exceeded $400K. May marks the 123rd consecutive month of annual increases, the longest-running streak in history.

Inventory remains tight, but did rise 12.6% from April to 1.16 million by the end of May, marking a 2.6 month sales pace. Inventory is down 4.1% from May of 2021.

“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” said NAR Chief Economist, Dr. Lawrence Yun.

“Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions,” Dr. Yun added.

He notes that it is expected that home sales in coming months will continue to decline in light of rising mortgage rates, yet appropriately priced homes will continue to sell quickly.

First time buyers made up 27% of sales in May, down from 28% in April. This diminishing number remains troubling, as the average hovered around 33% for years, and was at 31% in May 2021.

All-cash sales rising to 25% (up from 23% in May 2021), and individual investors or second-home buyers accounted for 16% of sales in May.

“Declining home purchases means more people are renting, and the resulting rent price escalation may spur more institutional investors to buy single-family homes and turn them into rental properties – placing additional financial strain on prospective first-time homebuyers,” said NAR President Leslie Rouda Smith.

“To counter this trend,” Rouda notes, “policymakers should consider incentivizing an inventory release to the market by temporarily lowering capital gains taxes for mom-and-pop investors to sell to first-time buyers.”

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Real Estate Big Data

NAR Chief Economist predicts housing market uncertainty

(BIG DATA) Warning bells on the housing market have been ringing for over a year. While this prediction isn’t a surprise, it’s disappointing news.

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Multitude of colorful homes representing housing market.

The housing market is booming. Many experts are concerned about another bust like we experienced in 2008, but the conditions are much different today. Homeowners aren’t extended like they were when the market crashed in 2008. National Association of Realtors® Chief Economist Lawrence Yun suggests that the housing market is still uncertain, even though he says, “housing kept the economy afloat” during the pandemic.

What is impacting the housing market? 

Yun cites record-low inventory and inflation as “curveballs” to the housing market. Many economists, including Yun, have been concerned about low inventory for many years, especially in certain markets. Even though builders are working hard to construct new residences, supply chain and labor issues are not accelerating the process.

Yun is more concerned about inflation impacting the housing market. He says,

“wages have risen by 6% from one year ago…but inflation is 8.5%.”

Rising mortgage rates have made mortgages cost $300 to $400 a month more, according to Yun. Many working families can’t afford that. Yun predicts inflation is going to be high for several months. The market will slow as the Federal Reserve raises rates.

Yun also cites the Russia-Ukraine war as another contribution to the uncertainty of the market. The war is also driving inflation, not just overseas, but in the United States. With gas prices climbing higher each week, this is impacting the housing market.

Is real estate a good investment in this market?

Last year, when Yun opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo in San Diego, he expected the “housing sector’s success to continue,” but he did suggest that 2022’s performance wouldn’t exceed 2021s.

“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”

There’s a lot we don’t know about the future. It’s disappointing to think that the housing market may be uncertain, but real estate is still a good investment.

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Real Estate Big Data

Housing starts stagnate, market conditions are rapidly shifting

Housing starts for April stagnated, marking the second consecutive months of declines, and more renters being left out of this shifting market.

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construction home growth housing starts

Housing starts stagnated in April, down 0.2% from the prior month, according to the U.S. Commerce Department.

The sentiment appears to be that although this marks the second straight month of dips, most are seeing today’s news as a positive, especially as construction of new homes was expected to fall 2.4% in April.

Further, housing starts are up 14.6% from April of last year, driven primarily by multifamily construction.

But it’s worth not getting overly excited, given that permits dipped 3.2% in April which is a forward-looking indicator, so expect starts to continue cooling in a time where we quite need the inventory.

Demand for housing inventory remains high, but the National Association of Home Builders reports today that confidence in the single-family housing market fell dramatically in May, marking the lowest level in two years.

Dr. Lawrence Yun, Chief Economist at the National Association of Realtors said in a statement, “The worst of the housing shortage is ending, but market equilibrium between supply and demand is still some ways off.”

He notes that as mortgage rates increase, builders “are chasing rising rents, with fewer homebuyers and more renters being forced to renew their leases,” noting that even prior to the interest rate increases, rents were rapidly rising and vacancy rates rapidly declining.

Pointing to another market shift, Dr. Yun notes that “Some degree of a return to the office is also fueling back-to-city living where high rises are concentrated.”

That’s a problem.

“Even as home sales look to trend back to pre-pandemic levels after the big surge of the past two years,” concludes Dr. Yun, “inventory will not return to pre-pandemic conditions. That means home prices will get pushed even higher in the upcoming months, albeit modestly, given the supply-demand imbalance.”

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