Rising home prices, affordability problems and a lack of education will affect many segments of the real estate industry, but none more than homebuyer and seller activity. The topic was discussed at this year’s REALTORS® Conference & Expo, alongside a breakdown of the National Association of REALTORS®’ (NAR) 2017 Profile of Home Buyers and Sellers.
The session was moderated by Dr. Lawrence Yun, chief economist and senior vice president of Research at NAR, and featured speakers Jessica Lautz, managing director of Survey Research and Communications at NAR, and Dr. William Doerner, senior economist of the Federal Housing Finance Agency (FHFA).
Lautz outlined national real estate trends in home-buying and -selling based on the recently released NAR report, while Doerner focused on local real estate data. Lautz began by dispelling a couple of myths regarding homeownership obstacles and challenges: one, that millennials never want to own anything, and, second, that delayed marriages are causing a drop in homeownership. NAR reports that single women were the second most common household buyer type (18 percent) behind married couples (65 percent).
The data provided by Lautz shows the disparity between homeowners and renters when asked if it is a good time to buy. Out of 1,000 consumers surveyed over the phone, 80 percent of homeowners responded ‘yes,’ compared to only 60 percent of renters who responded the same way. Seventy-eight percent of all surveyed participants said it’s a good time to sell and 60-66 percent stated it is difficult to qualify for a mortgage and save for a down payment.
When it comes to down payments, Lautz identified a very large knowledge gap. Eighty-seven percent of non-homeowners believe they need 10 percent or more in down payment funds. She found that consumers are generally unaware of the various first-time buyer programs that allow 5 percent down or even less. Lautz implored agents to educate clients on the options available to them, especially with the current low interest rates.
“Mortgage rates have been dropping over the past 10-15 years quite substantially,” said Doerner. “In terms of sparking sales, it’s an awesome interest rate environment.”
Homeownership challenges also stem from student loan debt—buyers are struggling to save for their down payment because of high monthly loan costs. Lautz reported that the median student loan debt for surveyed millennials is $41,200, more than their median income of $38,800. Of those surveyed, 80 percent were non-owner millennials that are delayed in homeownership by about 7 years. Only 55 percent are paying their loans on time.
“One way we can see first-time homebuyers getting into homeownership may be by living at home with their parents longer,” said Lautz.
While many are still struggling with affordability problems, buyers reported that finding the right property was the biggest struggle in the home-buying process. According to Lautz, the biggest deterrent for homeownership is rising home prices because of limited inventory. Low inventory of 4.2-months supply is driving 67 months of price increase year-over-year, Yun reported.
“The supply hasn’t really broken past that six-month supply that we would really like to see in the market to have that churn,” said Doerner.
There is also a suppressed number of first-time buyers in today’s market, impacting the ability of move-up buyers. Repeat buyer age has risen from 36 to 54. The baby boomer generation that is looking towards retirement is purchasing multi-generational homes, which will increase the amount of time buyers stay in a home.
Lautz also outlined where clients are coming from. Of those surveyed, 54 percent of buyers and 64 percent of sellers were repeat clients or came from agent referrals. When it comes to new business, data shows that 70 percent of buyers and 74 percent of sellers only contact one agent before signing with them.
“They are not interviewing many people and we have seen this increase rapidly in the last few years,” said Lautz.
Millennials are beginning their agent search online and already have a firm idea of what they want, according to Lautz. Buyers and sellers look for different things in an agent. While most buyers want an agent that has integrity and is honest, sellers prioritize an agent’s reputation and their ability to market a home.
Not only do statistics show where the business is coming from, but recent FHFA data also shows where it is going on a local level. Doerner concluded that downtown areas are where buyers are currently flocking to.
“Accelerations of price increases have been happening nationwide. The closer to downtown you can get, the better the appreciation,” said Doerner. “Downtown areas have the highest appreciation rates over a 25-year period.”
Yun agreed, stating that “There is a downtown resurgence and revival occurring.”
After a good dose of real estate information, Doerner emphasized that getting data down to a local level is essential in determining trends.
“We all know it’s about location. Certain areas can really drive what is happening within the cities. Data also needs to be at a local level,” said Doerner.
For more information, please visit www.nar.realtor.
Stay tuned to RISMedia for more from this year’s REALTORS® Conference & Expo.
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at firstname.lastname@example.org.
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