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Real Estate Big Data

Surprise nuggets in the 2020 home buyer, seller generational trends report

(REAL ESTATE) You may think you know generational behaviors, but there are interesting trends emerging as millennials begin to behave more like the Silent Generation.

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Everything you assumed about annoying millennials like me is apparently wrong. Sure, I had avocado sprouted grain toast and local fair-trade coffee for breakfast, but don’t let that ridiculous exterior fool you… it turns out that millennials are increasingly behaving more like the Silent Generation than any other.

According to the National Association of Realtors’ (NAR’s) 2020 Home Buyer and Seller Generational Trends Report, there are some shifts in consumer behavior that are worth noting, to better serve the market.

Dr. Jessica Lautz, VP of Demographics and Behavioral Insights emphasizes that “it is really important not to pigeon hole a buyer just based on their age,” and that it is important to remain informed of the trends.

For example, the aforementioned millennial generation behaving like the Silent Generation. Dr. Lautz notes, “when buying a home, they want to be close to friends and family,” a behavior typically emphasized by retirees, and that “they’re buying at affordable price points, and using referrals to find agents at high rates.”

Additionally, it’s not just Boomers that stay put – millennials want to own homes, and they intend on planting deep roots, Boomer style. The study also indicates that millennials are relying more on savings to purchase their homes than past generations.

Another surprise gem in the data amassed by NAR? Dr. Lautz observes that while most people think millennials want to bebop around inner cities, “lots of younger millennials are moving to small towns and suburbs where they can find affordability.” #MythBusted

In 2020, the real estate referral method looks a lot like 1920 in that there is a high level of trust in personal referrals. That’s worth noting if you’re spinning your wheels to attract new clients when business is likely to come from your existing clientbase.

It’s not all avocados and sunshine, though.

Dr. Lautz said, “there is a sad data point in that Gen Xers are still struggling to come out of the recession when it comes to home buying trends. They’re back on their feet financially, but many were underwater, which stalled the selling of their property, and they’re now recovering, but they have a longer period of time they have to wait before their finances are in order to do that.”

In other words, the recession has had a lingering impact on this middle child of a generation.

The 2020 generational trends report is something every industry practitioner should spend time getting to know (at least, practitioners that prefer to make money).

Below are the highlights – read them first, then dig into the full report here.

Characteristics of Home Buyers

  • 21% of homebuyers between the ages of 22 to 29 are unmarried.
  • 22% of homebuyers between the ages of 65 to 73 are single females.
  • 31% of homebuyers between the ages of 40-64 purchased a multigenerational home (will home adult siblings, adult children, parents, or grandparents).
  • 33% of homebuyers between the ages of 22 to 29 stated that they lived with parents/relatives/friends who paid and did not pay rent before their living arrangement.

Characteristics of Homes Purchases

  • The oldest and the youngest age groups (74 to 94, and 22 to 29) were most likely to purchase a new home for the amenities of new construction communities (though a small share of buyers aged 22 to 29 purchased new homes).
  • 25% of homes purchased by homebuyers within the ages of 22 to 29 were located in a small town.
  • 43% of homes purchased by homebuyers between the ages of 55 to 64 were located in a small-town or rural environment.
  • 64% of homebuyers between the ages of 22 to 29 stated the overall affordability of the home as a factor was influencing neighborhood choice.
  • 53% of homebuyers between the ages of 22 to 29 and 74 to 94 stated convenience to friends/family as a factor was influencing neighborhood choice.
  • 46% of homebuyers between the ages of 30 to 39 noted the quality of the school district as a factor influencing neighborhood choice.
  • 38% of homebuyers between the ages of 30 to 39 stated convenience to schools as a factor influencing neighborhood choice.
  • 29% of homebuyers between the ages of 65 to73 reported convenience to a health facility as a factor influencing neighborhood choice.
  • 36% of homebuyers between the ages of 74 to 94 stated convenience to a health facility as a factor was influencing neighborhood choice.
  • The median expected length of tenure in homes purchased between the ages of 40 to 73 is 20 years.

The Home Search Process

  • 63 % of homebuyers between the ages of 22 to 29 stated finding the right property as the most challenging step of the home buying process.
  • 60 % of homebuyers between the ages of 30 to 39 reported finding the right property as the most challenging step of the home buying process.

Home Buying and Real Estate Professionals

  • 92% of homebuyers between 22 to 29 and 30 to 39 bought a home through a real estate agent or broker.
  • 85% of homebuyers between 22 to 29 used a real estate agent to help understand the buying process.
  • 51% of homebuyers between 22 to 29 found a real estate agent through a referral from friends or family.
  • 45% of homebuyers between the ages of 30 to 39 found a real estate agent through a referral from friends or family.

Financing the Home Purchase

  • 27% of the homebuyers between 22 to 29 stated gift from a relative or a friend as the source of their down payment.
  • 6% of homebuyers between 22 to 29 stated loan from a relative or a friend as the source of their down payment.
  • 46% of homebuyers between 65 to 73 stated savings as the source of their down payment.
  • 56 % of homebuyers between 65 to 73 stated proceeds from the sale of the primary residence as the source of their down payment.
  • 39% of homebuyers between the ages of 74 to 94 stated savings as the source of their down payment.
  • 52% of homebuyers between 74 to 94 stated proceeds from the sale of the primary residence as the source of their down payment.
  • 30% of homebuyers between 22 to 29 stated saving for a downpayment was the most difficult task in the buying process.
  • Home purchases delayed at a median of 5 years between the ages of 40 to 54, due to difficulty saving.
  • 7% percent of homebuyers between 40 to 54 reported having their buyer application rejected by a mortgage lender.
  • 15% of the homebuyers between 50-54 stated they’d sold the distressed property.
  • 82% of homebuyers between the ages of 22 to 29 reported they view their home as a good financial investment.
  • 84% of homebuyers between the ages of 30 to 39 stated they view their home as a good financial investment.

Home Sellers and Their Experience

  • 28% of home sellers between 30 to 39 stated their home was too small as the primary reason for selling their previous home.
  • 21% of home sellers between 40 to 54 indicated their home was too small as the primary reason for selling their previous home.
  • 19% of home sellers between 55 to 64 stated the primary reason for selling their previous home was to move closer to friends and family.
  • 28% of home sellers between 65 to 73 stated the primary reason for selling their previous home was to move closer to friends and family.
  • 33% of home sellers between 74 to 94 stated the primary reason for selling their previous home was to move closer to friends and family.
  • 17% of home sellers between 74 to 94 stated home was too large as the primary reason for selling their previous home.
  • 11% of home sellers between the ages of 40 to 54 who lived in the home or rented their home to others while living elsewhere, stated they wanted to sell earlier but waited or stalled because the home was worth less than the mortgage.
  • The median tenure of home sellers between the ages of 55 to 64 in the previous home is 12 years.
  • The median tenure of home sellers between the ages of 65 to 73 in the previous home is 12 years.
  • The median tenure of home sellers between the ages of 74 to 94 in the previous home is 12 years.

Home Selling and Real Estate Professionals Methodology

  • 21% of homebuyers between the ages of 30 to 39 stated helping the seller find ways to fix up home to sell it for more as the most wanted service from real estate agents.
  • 20% of homebuyers between the ages of 40 to 54 stated helping the seller find ways to fix up home to sell it for more as the most wanted service from real estate agents.
  • 23% of homebuyers between the ages of 55 to 64 stated helping the seller market home to potential buyers is the most wanted service from real estate agents.

Real Estate Big Data

Home sales dive 10% in May – when is a sales rebound expected?

(REAL ESTATE) Home sales plummet in May, which we all expected, but when will sales begin to recover in light of this pandemic?

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As you would expect, May marks the third consecutive month of home sales declines amidst a global pandemic. According to the National Association of Realtors (NAR), existing home sales fell 9.7% in May compared to April, down a whopping 26.6% compared to this time last year.

The silver lining is that values continue to improve, with a median existing home price of $284,600 nationally, up 2.3% from May 2019, marking the 99th month of year-over-year gains.

Inventory levels rose 6.2% from April, and are down 18.8% from May 2019. Average days on market didn’t move much, at 26 days being equal to May 2019, and down from 27 days in April.

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Dr. Lawrence Yun, NAR’s chief economist.

He added, “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

Sales also reflected an uptick in suburban sales over urban home sales. Dr. Yun cited work from home demands, however, anecdotally we would add some people moving away from densely populated areas in response to recent unrest.

What will ease housing conditions?

As he has observed repeatedly in recent years, Dr. Yun points to home builders. “New home construction needs to robustly ramp up in order to meet rising housing demand. Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”

Mortgage Banker’s Association’s (MBA’s) SVP and Chief Economist, Dr. Mike Fratantoni’s insight pointed to inventory challenges as well: “As buyers are returning to the market, as evidenced by the strong, nine-week rebound in MBA’s purchase application data, the lack of homes for sale will be a real constraint. Although demand certainly dropped in March and April due to the crisis, supply dropped even more, and has thus far kept home prices from declining. We expect that home-price growth will pick up over the summer due to insufficient supply levels.”

Dr. Fratantoni noted, “The market is supported by strong demand from first-time homebuyers, who represented 34% of home purchases in May. Millennial-driven demand will be a tailwind for the market for the next several years.”

“Although the real estate industry faced some very challenging circumstances over the last several months, we’re seeing signs of improvement and growth, and I’m hopeful the worst is behind us,” said NAR President Vince Malta, broker at Malta & Co., Inc.

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Real Estate Big Data

Mortgage rates are still falling, demand still rising

(REAL ESTATE BIG DATA) Mortgage rates are low, so people should buy or refinance before they go up. And although inventory is low, demand is up as well.

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Mortgage rates have dropped to another record low with the fourth reduction this year and buyers are taking notice. According to Mortgage Bankers Association (MBA) economist Joel Kan, “The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence.” Mortgage applications rose 4% last week from the previous week and were 21% higher than last year, according to the MBA’s seasonally adjusted index. Nine straight weeks of gains and the highest volume in more than 11 years is significant.

A year ago the 30-year home loan averaged 3.84%, but for the week ending June 18th, the 30-year fixed-rate mortgage averaged 3.13%, down eight basis points from a week earlier. The previous record low was 3.15% at the end of last month. 15-year fixed-rate mortgages have also seen a drop. Four basis points down to an average 2.58% rate.

With numbers like this, Americans may not want to wait too much longer before locking rates in.

Lower rates have also encouraged an increase in applications for refinancing, with applications up 10% for the week and 106% higher than a year ago. “Refinancing continues to support households’ finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery,” Kan said.

There is no certainty how long rates will remain this low, however. Matthew Speakman, an economist with Zillow said “Upticks in coronavirus cases across the country left market participants skeptical of the economic recovery’s sustainability. More bad news regarding the uptick in coronavirus cases would likely send rates back downward, possibly to new lows. However, rates could just as easily begin to trend upward again, particularly if key economic data or measures to contain or treat the virus show meaningful improvements.”

The housing market is seeing a rebound. COVID-19 stay at home orders mean more people are wanting to invest in their homes and buyers are ready to capitalize on low rates before they increase. Unsold inventory remains at a low, however, and until there are more houses up for sale there is a limit on how high sales activity will increase.

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Real Estate Big Data

Chinese investments in America dipped 90% in 48 months

(REAL ESTATE BIG DATA) It might have been obvious to some but as a result of our recent relationship with them, Chinese investments in American real estate are down.

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Since 2016, American eyes have been on China and their investment–or lack thereof–in American real estate. According to Insight 24/7 News, Chinese investment in America has dropped from $46.5 billion to a mere $5 billion in the past four years–roughly a 90 percent decrease. Believe it or not, though, this doesn’t exactly spell doom for the future.

So how did we get here?

We’ve written at length about foreign investment in American real estate, a process from which China is not exempt. In mid-2016, Chinese investment peaked; with the election of President Trump and the ensuing trade war, these investments came under fire, leading to the rapid decrease in standing investments culminating in what we see today.

It would be easy for someone to glance at these numbers, note the disparity, and panic. After all, don’t rapid drops in real estate investment signal impending disaster?

In this case, no–though it is emblematic of a current problem. The removal of Chinese ownership of properties in the U.S. simply addresses a larger issue–that the relationship between these two countries is tenuous, and increasingly stiff regulations on foreign investment coupled with a reluctance on the Chinese government’s behalf to invest is the very recipe for declining numbers.

When one looks at the fact that many of these property grabs were illicit or based on loose regulation–especially through the optic of Chinese markets emerging as competitors rather than partners–the investments themselves begin to look problematic, making their decline seem like more of a side-effect of a system at work than a symptom of a greater illness.

However, in an age of generalizations and hot tempers, it’s important to take a minute to remember that this is not a “Chinese” issue–far from it. The people of China have about as much say in their government’s illicit affairs as we have in the caloric count of a McMuffin–often less, in fact–and while the current political climate has led to some demonization of Chinese values and investments, let’s not forget that there can be a fine line between regulation and racism.

As Insight 24/7 News points out, America has become an “inhospitable” place for Chinese investment–a byproduct of the aforementioned regulation and tariff war. This kind of hostility may be warranted, but directing it at Chinese residents or citizens never will be.

It’s also worth keeping in mind that Chinese investment in American property is likely to continue decreasing, at least for the near future. Consumer attitudes toward a Chinese market aren’t great in the wake of COVID-19, and the trade war doesn’t show any signs of stopping any time soon.

Simply put, until the U.S. government and the Chinese government can learn to trust each other again, the likelihood that either will invest in the other isn’t optimistic.

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