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NAR Report: Trends for home sellers and of homes sold in 2020

(REAL ESTATE BIG DATA) NAR’s 2020 report reveals the who, what, where, and why of homes sold. Here’s some trends to keep an eye on going into 2021.

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home sales

It’s a pretty good time to sell a home.

With historic lows in inventory driving up prices in many markets, sellers are typically getting 99% of asking price and selling within 3 weeks, according to the numbers in the National Association of Realtors’ “2020 Profile of Home Buyers and Sellers.”

Also, people 54 and younger tended to trade up to larger, more expensive homes and were the most active sellers. Older people were more likely to downsize to smaller, less expensive homes.

While this latest edition of NAR’s annual report focuses on sellers who closed from July, 2019, through June, 2020, NAR added a look at trends related to the start of the COVID-19 pandemic, pulling out data from sellers who closed in April through June, 2020. They found upswings in sellers’ desire for more space and their sense of urgency to sell, as well as changes in how agents are marketing homes. (Trends for buyers also were seen in the demand for more space, including homes suitable for multiple generations.)

Here are some of the main takeaways from the full report.

Typical sellers stayed in their home 10 years.

The median number of years that sellers had been in their homes has held steady at 9 to 10 years since 2011. However, 2020’s most active sellers were age 65 and older and had been in their home for 16 years or longer. The seller short-timers were ages 18 to 34, and they typically sold within 5 years. Looking at property type, owners of detached single-family homes tended to stay the longest (median 11 years), followed by mobile/manufactured homes (median 9 years).

Furthermore, 69% of sellers had sold a home before; 31% were first-timers.

Sellers are getting what they ask for.

Tight inventory is continuing to drive up prices in many areas of the U.S., and homes are tending to sell quickly, typically within 3 weeks. For all sellers, the sales price is typically 99% of the final listing price. It’s even higher in the West at 100%, but some buyers in the South and Midwest are getting 101% to 110% over list.

How much of the asking price sellers got started to decline at 3 to 4 weeks, which is also when price reductions started to kick in.

Very few homeowners are delaying selling because they’re underwater.

Home prices are up, so the percentage of sellers facing trying to sell a home that’s worth less than their mortgage has decreased from 7% in 2019 to 6% in 2020. In addition, 10% of sellers who bought 11 to 20 years ago reported waiting to sell in hopes of a more favorable market. This doesn’t seem to be much of an issue for sellers, as 95% said they sold when they wanted to.

Sellers are making more money on their homes.

Typically $66,000 in equity, to be exact. That’s up from 2019, when the median was $60,000. The price gain went from 31% to 33%. Unsurprisingly, longer tenure meant even more money: 8 to 10 years made $79,900, 11 to 15 years made $49,800, and homes sold after 21 years brought in a whopping $152,300 over the original purchase price.

Equity Earned in Home Recently Sold, by Tenure in Home

Sellers tend to be older, have higher incomes, and be part of a married couple.

Some numbers:

  • Age: Median is 56. Most-active age groups were 65 to 74 (24%) and 55 to 64 (22%).
  • Income: 2019 median was $106,500, up from $102,900 in 2018. Highest incomes were in the Northeast and the West.
  • Race/ethnicity: 90% identified as White or Caucasian.
  • Household makeup: 71% married couples; 16% single females; 7 % single males; 4 % unmarried couples; 2 % other. 68% have no children under 18.

After the sale, they’re mostly buying nearby.

When it came to location, 70% of sellers stayed in the same state, 16% changed regions, and 14% went for the same region, different state. In fact, 40% of all sellers moved 10 or fewer miles away from their previous home. The median move was 20 miles away for all sellers, but for people age 65 and older it was 40. To add to that, 40% of sellers ages 65 to 74 moved more than 100 miles away. People in the West moved the farthest, with a median of 35 miles away.

Distance between home purchased and home recently sold, by age

Suburbs and the South are hot.

Of all homes sold, 41% were in a suburb or subdivision. Small towns made up 18%, urban areas/central cities had 13%, and rural areas took 15%. Interestingly, 80% of all homes sold were detached, single-family properties.

It’s not just the weather in the South that’s hot. The region accounted for 37% of homes sold or for sale, while the West had 25%, the Midwest had 24%, and the Northeast had 14%.

Location of Home Sold

Nearly half of sellers traded up on space; about a third traded down.

When it came to space, 44% of sellers bought a larger home, 30% kept about the same amount of space, and 30% went smaller. Sellers age 44 and younger grabbed 600 to 700 more square feet. Buyers 55 and older downsized by about 100 square feet. The majority of homes sold had 3 bedrooms and 2 full bathrooms.

Size of Home Purchased Compared to Home Recently Sold, by Age of Seller

Most sellers bought newer, more expensive homes.

When it came to vintage, 61% of sellers went on to buy a newer home, 26% found an older one, and 21% stayed with the same vintage. For 49% of sellers, trading homes meant paying more, whereas 27% bought a less expensive home, and 23% stayed at the same price point. The group who splashed out the most was ages 35 to 44, who paid $98,900 more than they had paid for the house they sold. Those 55 and older spent between $22,800 and $27,500 less than they had paid.

Price of Home Purchased Compared to Home Recently Sold, by Age of Seller

Being closer to their people and needing more space are the top reasons for selling.

For sellers overall, 15% said they wanted to move closer to friends or family, 14% said their home was too small, and 12% had a change in family situation (divorce, birth of a child, etc.). Another reason cited was job relocation including 11% of sellers, and those were people who moved the greatest distances.

For those who stayed in the same or a nearby neighborhood, the number one reason to sell was that the house was too small, and that includes nearly a third of first-time sellers. Reason number 2 was that the house was too big, including 12% of repeat sellers, although their top reason for selling was to be closer to family and friends (19%).

Primary Reason for Selling Previous Home, by First-Time and Repeat Sellers

Sellers understand the benefits of having an agent – and give their agents a good grade.

The percentage of sellers who worked with a real estate agent held steady from 2019 at 89%, a rise from 79% in 2001. But there were some regional differences. Homeowners in the West (92%) and the Northeast (91%) topped this list, whereas the lowest rates were in the South (89%) and the Midwest (88%).

Sellers generally reported being happy with the process: 69% said they were “very satisfied” and 21% marked “somewhat satisfied.” (On the buyers side, agents got higher marks: 76% said they would “definitely” use their agent again, while 15% said “probably.”)

FSBOs are pretty much no go; iBuyers haven’t caught on.

“For sale by owner” transactions stayed below the historic norm at 8% this year, after having been as high as 12% to 14% from 2001 to 2008. For sellers who did go that route, 51% already knew the buyer (compared with 8% of all sellers). iBuyer programs got fewer than 1% of recent sellers’ business.

Homes tended to be on the market for 3 weeks. More than that, and sellers got less.

The median number of weeks on the market for all sellers was 3 weeks, except for the Midwest, which logged 2 weeks. Sellers whose homes took 2 weeks to sell – more than a third of all sellers – typically got 100% of their asking price. For the 29% of sellers who sold in less than a week, they did even better and got more than they asked for.

As usual, the longer a property is on the market, the less sellers got of their asking price. Homes that sat on the market 17 weeks or more typically got the seller 94% of the listing price; only 16% of those homes got the initial asking price.

Sales Price Compared with Listing Price, by Number of Weeks Home was on the Market

Notably, 62% of all sellers did not reduce the asking price on homes sold. Reductions typically started to kick in at about 3 to 4 weeks on the market.

Number of Times Asking Price was Reduced, by Number of Weeks Home was on the Market

Less than half of sellers offered incentives.

Of all sellers, 67% offered no incentives, and sellers in the Northeast were least likely to try to sweeten the deal. Incentive offers typically started kicking in between 3 and 4 weeks on the market. Home warranties were the most popular incentive (17%), followed by help with closing costs (14%).

Incentives Offered to Attract Buyers, by Number of Weeks Home was on the Market

Lisa Wyatt Roe is an Austin writer and editor whose work has been featured on CNN.com/Travel, in Texas Parks & Wildlife Magazine and in the book “Seduced by Sound: Austin; 100 Musicians on Why They Make Music.” Travel and live music feed her soul. Volunteering with refugees feeds her sense of purpose. And making friends laugh feeds her deep (yet possibly sad) need to get all the laughing emojis on Facebook.

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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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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