Last week we started discussing the Profile of Home Buyers and Sellers that is published annually by the National Association of REALTORS®. We began that discussion with highlighting the trends of sellers when it comes to listing and selling homes. This week, we are continuing the discussion by focusing on the buyers who are looking for homes. The real estate market is a delicate balance of what sellers are offering verus what buyers are looking for: supply and demand.
If you are a seller, it is important to know what other sellers in the market are offering AND to know what the buyers are looking for. So, if you missed last week’s blog, so back and read it here.
If you are a buyer, educate yourself about what other buyers are looking for so that you can adequately educate yourself about entering into multiple offer situations and you can win the bid. It is also important for all buyers to understand the seller’s perspective to understand why a house is priced the way it is.
You may recall us touting the high priority we place on continued training for our agents in addition to legally required continuing education. Part of this training encompasses keeping ourselves and our agents updated about current trends in the national housing market and how that translates to our local areas. A few weeks ago, for example, we talked about ROI and cost versus value when it comes to home improvements and how these statistics can get pretty granular when it comes to different markets, therefore making it important to seek advice from a real estate agent who is up-to-date on current home improvement trends.
For example, we all know how wonky 2020 was, and the world of real estate was no exception. First a broad overview:
- Buyers who purchased during the onset of COVID-19 were more likely to have higher household incomes, purchase at a higher price point, and more likely to purchase a multi-generational home.
- Among all buyers last year, the share of first-time home buyers continued to fall to 31 percent, from 33 percent the year before. This is the lowest share since 1987 when it was at 30 percent.
- While first-time buyers have had record low interest rates they have also faced a housing environment that has scarce inventory (because people are staying in their homes for 10 years rather than 6-7 years) and rising home prices.
- Tightened inventory is affecting the home search process of buyers. Due to suppressed inventory levels in many areas of the country, buyers are typically purchasing more expensive homes as prices increase. The number of weeks a buyer searched for a home fell to eight weeks from 10. Many buyers took advantage of new virtual tours and virtual listings and used those in their search process. Buyers continue to report the most difficult task for them in the home buying process was just finding the right home to purchase.
- Buyers needed the help of a real estate professional to help them find the right home for them, negotiate terms of sale, and help with price negotiations. Eighty-eight percent of buyers used an agent to help them purchase a home
Next, lets examine some specific aspects of buyers and the home buying process:
Home Buying and Real Estate Professionals: the right agent can make a difference
• Eighty-eight percent of buyers recently purchased their home through a real estate agent or broker, and six percent purchased directly from a builder or builder’s agent.
• Having an agent to help them find the right home was what buyers wanted most when choosing an agent at 51 percent.
• Forty percent of buyers used an agent that was referred to them by a friend, neighbor, or relative and 13 percent used an agent that they had worked with in the past to buy or sell a home.
• Seventy-three percent of buyers interviewed only one real estate agent during their home search.
• Ninety-one percent of buyers would use their agent again or recommend their agent to others.
The Home Search Process: how you find a home can affect when you find a home
• For 43 percent of recent buyers, the first step that they took in the home buying process was to look online at properties for sale, while 18 percent of buyers first contacted a real estate agent.
• Ninety-one percent of recent buyers found their real estate agent to be a very or somewhat useful information source.
• Buyers typically searched for eight weeks and looked at a median of nine homes, and viewed five of these homes only online.
• The share of home buyers who used the internet to search for a home increased to an all-time high of 97 percent. This is why we at FCTE feel so passionate about our website. We do it for YOU, dear readers!
• When asked where their internet searches were conducted, home buyers were split; they typically conducted 50 percent of their search on a desktop/ laptop and 50 percent on a mobile device(s).
• Sixty-four percent of recent buyers were very satisfied with their recent home buying process.
Characteristics of Home Buyers: Why should you, as a buyer, care what a typical buyer looks like? Because in the current market, other buyers are your competition.
• First-time buyers made up 31 percent of all home buyers, a dip from last year’s 33 percent.
• The typical buyer was 47 years old this year, holding steady from last year, and the median household income for 2019 rose again this year to $96,500.
• Sixty-two percent of recent buyers were married couples, 19 percent were single females, nine percent were single males, and nine percent were unmarried couples.
• Twelve percent of home buyers purchased a multigenerational home, the same as last year, to take care of aging parents, because of children over the age of 18 moving back home, and for cost-savings.
• Ninety-one percent of recent home buyers identified as heterosexual, three percent as gay or lesbian, one percent as bisexual, and five percent preferred not to answer.
• Eighteen percent of recent home buyers were veterans and two percent were active-duty service members.
• At 27 percent, the primary reason for purchasing a home was the desire to own a home of their own. For first-time buyers, this number jumps to 64 percent.
Financing the Home Purchase
• Eighty-seven percent of recent buyers financed their home purchase. Those who financed their home purchase typically financed 88 percent.
• First-time buyers who financed their home typically financed 93 percent of their home compared to repeat buyers at 84 percent.
• For 58 percent of buyers, the source of the downpayment came from their savings. Thirty-eight percent of buyers cited using the proceeds from the sale of a primary residence, which was the next most commonly reported way of securing a downpayment.
• For 11 percent of buyers, the most difficult step in the home buying process was saving for a downpayment.
• Of buyers who said saving for a downpayment was difficult, 47 percent of buyers reported that student loans made saving for a downpayment difficult. Forty-three percent cited high rent/mortgages and 36 percent cited credit card debt also making saving for a downpayment hard.
• Buyers continue to see purchasing a home as a good financial investment. Eighty-three percent reported they view a home purchase as a good investment.
Home Buyers Before and During COVID-19
• Buyers who purchased after March were more likely to purchase a multi-generational home at 15 percent compared to 11 percent who purchased before April. Pandemic buyers purchased multi-generational homes for a number of reasons.
• Buyers who purchased after March have a shorter expected tenure in the home they purchased, just 10 years compared to those who purchased before the pandemic who expect to own their home for 15 years.
• Fifty-seven percent of buyers who purchased during the pandemic purchased in a suburban location, compared to 50 percent of pre-pandemic buyers. However, 23 percent of buyers who purchased prepandemic purchased in a small town compared to 16 percent of buyers post-pandemic.
• Buyers who purchased during the pandemic purchased a home that typically was $339,400 compared to pre-pandemic buyers who purchased a home that was $270,000. Twenty-three percent of buyers who purchased after March purchased a home that was $500,000 or more.
• Buyers who purchased after March of 2020 searched for just two weeks before working with an agent compared to those who purchased pre-pandemic who searched for three weeks before an agent.
• Finding the right property was the most difficult step for half of buyers before and after March. However, one in six buyers after March ran into the inability to move forward in their buying process due to COVID-19.
For more information you can look at the full profile report here:
At F.C. Tucker Emge REALTORS® we have numerous technological tools to make your home search easier, even in a pandemic. If you have any questions about this blog or its contents, please reach out to your favorite F.C. Tucker Emge REALTOR®. They love hearing from you and they love your questions. Let’s talk.
