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The National Association of Realtors (NAR) released its 2024 Profile of Home Buyers and Sellers last month. I got my cliff notes of the report from a newsletter by Jason Barlow of Arbor Financial Group but you can read the full NAR report here.
The NAR Profile helps people like me, Jason, and others in the real estate industry understand what buyers and sellers are looking for. Here are the basic takeaways:
Shift in First-Time Buyers: first-time buyers made up only 24% of the market this year, the lowest share since 1981.
Aging Buyer Demographics: the average first-time buyer is now 38, up from 35 in 2023, and repeat buyers are typically 61, showing a trend toward older buyers.
Family and Home Choices: only 27% of buyers had children at home, the smallest share to date. Plus, 17% purchased multigenerational homes.
Financing Trends: cash sales are up, with 26% of buyers paying fully in cash – a record high.
Agent Loyalty: buyers and sellers still overwhelmingly choose agents they know, with 40% of buyers and 66% of sellers using a referred agent.
Technology’s Role: 43% of buyers’ first step was online, with the internet being the main tool for their search.
If you are considering buying or selling, a discussion about the process, market, and your expectations is a great place to start. Give me a call if you want to understand more about the process or email me directly: Kristin.lanham@bhghome.com.
The National Association of Realtors (NAR) conducted an annual survey to create a profile of home buyers and sellers. It helps define the trends of the past year and look forward to those of the next. I want to share some of their key findings:
Homes typically sold at a record pace of one week and received full asking price from July 2020-June 2021.
Kristin’s take: That has been the theme in Contra Costa County all year. Right now, condos/townhomes (those with HOAs) are not as robust and might provide an opportunity not to compete. Or, if it has been sitting for more than 20 days, you might get it at a lower price. I believe that will change at the beginning of the year, as it did this year.
Tenure in the home dropped from 10 years to 8 years, the largest year-over-year decline in the history of the data set (40 years).
Kristin’s take: It used to be seven years was the average time in a home. That changed with the meltdown and now it’s dropped again, primarily from the pandemic. The ability to work from home allowed people to move, whether it is out of state or to a bigger space.
Among repeat home buyers and home sellers over the last year, a key factor for moving was the desire to live closer to family and friends, while an equally important motivator was the need for more space or a bigger home.
Twenty-eight percent of first-time buyers reported that they used a gift or a loan from friends or family in order to make a down payment on a home and 29% said saving for a down payment proved to be the most difficult step in the entire buying process. For repeat buyers, 56% cited using equity generated from the sale of a primary residence toward their down payment. For first-time buyers, the typical down payment was 7%, while it was 17% among repeat buyers.
Kristin’s take: This is how first-time homebuyers are getting into homes. I have seen family members gift $300k for the down payment and pay for closing costs.
Forty-seven percent of buyers said the agent they used was referred by a friend, neighbor, or relative, and 13% used an agent that they had already worked with on a past transaction. Seventy-three percent of buyers reported that they needed to interview only one real estate agent during their home search, and a whopping 90% said they would use their agent in the future or recommend the agent to others.
Kristin’s take: It all comes down to trust and how good of a job the agent does communicating, managing expectations, and explanation of the market. It can take some time to get an offer accepted and it is a process buyers have to experience and learn from. For selling a home, the key is to price it correctly, as buyers are paying over list, but if it is listed where you think it might sell, buyers are expecting to offer more, and then it may sit.
This time of year, there are a ton of “housing market prediction” pieces flooding the airwaves. Some are crazy, many are measured, and when you put them all together, you get a fairly clear picture of where experts think the industry is headed in 2020.
Below, we’ve gathered the top 10 predictions from a few different sources (Realtor.com, WaPo, and Forbes, to be exact). I’ll add my two cents at the bottom, but here are some possibilities for housing in 2020:
1. Moderate Growth in the Housing Market
New home sales are expected to rise, but existing home sales will remain held down by a lack of supply. Overall, this equals an expectation of moderate growth.
2. Continued Low Rates
The National Association of Realtors (NAR) expects the 30-year fixed-mortgage rate will remain below 4 percent in the coming year, moving to 3.8 percent by the end of 2020.
3. Hottest Home Appreciation Markets? Not in CA
The NAR expects 10 markets to have home price appreciation that outpaces the rest of the country over the next 3-5 years. None are in California:
Ogden, UT
Las Vegas, NV
Fort Collins, CO
Colorado Springs, CO
Dallas/Fort Worth, TX
Columbus, OH
Raleigh/Durham/Chapel Hill, NC
Charlotte, NC
Charleston, SC
Tampa/St. Petersburg, FL
4. Home Prices Will Flatten
Don’t expect to see a surge in home prices – experts at Realtor.com think they will only increase 0.8 percent nationally. They expect prices to decline in some major cities, including San Francisco.
5. Again, Top Markets Shut Out CA
Realtor.com agrees with the NAR in that California won’t have any of the top markets in 2020. Their list:
Boise, ID
McAllen, TX
Tucson, AZ
Chattanooga, TN
Columbia, SC
Rochester, NY
Colorado Springs, CO
Winston-Salem, NC
Charleston, SC
Memphis, TN
Downtown Colorado Springs
6. Competition Will Increase
Redfin thinks that 1 out of 4 offers will face a bidding war. This increased competition might push price growth up to 6 percent higher in the first half of the year, before it evens out to a more moderate 3 percent.
7. Revenue Will Fall
The Morgage Bankers Association expects lenders to chase fewer loans. They say purchase applications will be up slightly, while refinances will be lower.
8. Millennials Will Shape the Market
Realtor.com data shows that Millennials made up a whopping 46 percent of all mortgage originations in September 2019 (meanwhile, that share of Baby Boomer and Gen X mortgage activity declined). And they’re looking to move into smaller, suburban towns on the outskirts of major metros. Forbes says they want places with live-work-play neighborhoods with the safety and affordability of suburbs AND the transit, walkability, and 24-hour amenities of the big city.
9. The Industry Will Continue to Digitize
Manual, paper-laden processes are old news. Tech-savvy Millennials are entering the market at a fast pace, so the real estate industry is adjusting to meet their demands. Get ready for e-signing everything!
10. California’s Market is Changing
According to Realtor.com, three of the top four metro areas seeing the largest decline in inventory are in Northern California (San Jose, Sacramento, and San Francisco-Oakland).
From what I am seeing and in conversation with other agents the 680/24 corridor will have a robust spring. I had one of the busiest Decembers ever and expect the will continue into the first quarter. The challenge will be finding buyers homes, as I think most will have multiple offers.
Next January, we will have to revisit these prognostications and see which ones were on the money$$$.
Mortgage Consultant Bob Schwab posed an interesting question on his blog recently: is purchase demand softening? He writes that over the last several years, buyer demand has far exceeded the housing supply. This has led to home prices appreciating by an average of 6.2 percent each year since 2012.
The Foot Traffic Report, Realtors Confidence Index (both National Association of Realtors), The Showing Index (ShowingTime), and The Real Estate Broker Survey (The Z Report by Zelman and Associates) are the four major reports used to measure buyer activity. Three of the four have revealed that the purchase demand may, in fact, be softening:
The Foot Traffic Report
Latest reports say buyer demand remains strong, due to supply and new construction remaining unable to keep up with buyer demand – despite a healthy economy and labor market.
The Showing Index
In July 2018, the Showing Index recorded buyer interest deceleration compared to the previous year for the third month in a row. They think buyer demand is softening.
Realtors Confidence Index
This measure reported slower homebuying activity in July 2018, down from the same month one year ago. It is the fifth straight month they’ve seen a decline, so they agree buyer demand is softening.
The Real Estate Broker Survey
The Z Report also finds buyer demand to be softening, stating that “a level of “pause” has taken hold in many large housing markets.” Their buyer demand rating of 69 (1-100 scale) is above average, but down from 74 last year.
When most of the major measures of buyer activity report that demand is softening…it may just be true. According to Bob, the strong buyers’ market directly after the housing crash was followed by a six-year stretch of a strong sellers’ market. If demand continues to soften and supply begins to grow, as expected, there will be a return to a more neutral market. Though that wouldn’t favor buyers or sellers immediately, it is a better long-term look for real estate.
A direct quote from Bob: The era of cheap money might be coming to an end. Interest rates on mortgages are up three-quarters of one percent in the last year. The Federal Reserve is expected to raise short-term rates one-quarter of one percent at their September meeting and another one-quarter of a percent in December. Come October, bonds will have to stand on their own feet again as the Fed will officially end its “quantitative easing.” There are also some early signs of wage inflation as the unemployment rate continues to improve and businesses struggle to find employees. As I always remind my clients, mortgage rates are still fantastic from a historical perspective. They are still sitting in the mid to high fours. If you are considering buying a home or refinancing a mortgage this would be a great time to make a move.”
And my take: As rates and prices have increased, we are starting to see homes sit on the market longer and sell for less than they did six months ago. It really depends on the home and location. In Parkmead, buyers seem to want single story homes with current updates and a flat yard, as with the sale of 1691 Lilac. We still have an inventory shortage, but buyers are now taking their time, and a shift isn’t necessarily a bad thing. We will see if the lull is seasonal, but it most likely we will see the rate of appreciation slow down and sellers may have to adjust what they believe the value of their home is and buyers may not get as good of a deal as they expected.
There have been a lot of articles about interest rates and the stock market recently. First, the German 10-Year Government Bond Yield has hit negative territory. In layman’s terms, this means that Germany gets paid interest to borrow investors’ money, the same thing is happening in Japan. Thus, Germany and Japan are getting paid to borrow money.
On the surface, this seems silly. Why would investors take a negative yield or pay somebody to borrow their money? Because it’s safe. Investors will put money wherever they can in order to ensure they can safely recoup it in the future.
How does this help the real estate market? First, the demand for bonds keeps rates very low, making real estate leverage much cheaper (The Brexit will also have an impact, which will be a different post). When investors have a lot of cash and are looking to put it somewhere, real estate investing becomes a good place to do so.
According to the National Association of REALTORS®, the number of homes that went under contract to be sold in April was the highest in more than a decade. It was also the strongest month in more than eight years for new home sales – with a 16.6% jump from the previous month. We do tend to see a bit of a lull in the summer as families head off for vacation.
If you are a buyer, it might be a great time to jump into the real estate market! Give me a call if you would like some help.
