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NAR buyer-seller surveys hit 35-year milestone

WASHINGTON – Oct. 18, 2016 – When the National Association of Realtors®’ (NAR) first Profile of Home Buyers and Sellers came out 35 years ago, mortgage rates were over four times higher and first-time buyers made up 44 percent of overall sales.
Over time, homebuyer tastes and behaviors have changed – yet many have stayed the same. In anticipation of the 2016 survey release on Oct. 31, NAR identified five noteworthy real estate trends since the survey’s inception.
NAR’s buyer-seller profile dates back to 1981; it’s the longest-running series of national housing data evaluating the demographics, preferences, motivations, plans and experiences of recent home buyers and sellers. Since the inaugural survey, consumer preferences have evolved and housing costs have gotten more expensive – even in real terms. In 1981, the typical buyer purchased a 1,700-square-foot home costing $70,000 ($201,376 in inflation-adjusted dollars) In last year’s survey, purchased homes were typically 2,000 square feet and cost $220,000.
“When the Profile of Home Buyers and Sellers made its debut 35 years ago, consumers and Realtors navigated a much different real estate landscape,” says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “The Internet hadn’t been invented, the average monthly mortgage rate was 15.12 percent, and one’s description of a ‘smart home’ was probably how many children living in the household made honor roll.
Salomone call Realtors “one constant” as the “leading advocate for homeownership and private property rights and a trusted expert in helping buyers and sellers close the deal.”
Notable 35-year trends with homebuyer and sellers
1. First-time buyer participation is down
Last year’s survey highlighted the ongoing hardships young adults have faced since the Great Recession and its consequences for the housing market, such as underemployment, higher student debt, the inability to save for a downpayment and a trend for young adults to delay marriage and having children. The 2015 survey had the lowest share (32 percent) of first-time buyers since 1987 (30 percent); and according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds at 34.1 percent is the lowest level in records that date back to 1994.
Sales to first-time buyers peaked in 2010 and 2009 at 50 percent and 47 percent, respectively. However, the long-term average is 39 percent of sales after excluding the skewed data from those two peak years, which were influenced by the popular first-time homebuyer tax credit program available at the time.
“Monthly feedback from Realtors so far this year indicates that sales to first-time buyers have remained subdued in today’s tough market of swiftly rising home prices and meager supply levels at affordable prices,” says Lawrence Yun, NAR chief economist. “A strong majority of current renters under the age of 34 say they want to own a home in the future, but their impending rise will be a gradual one and is not likely to increase substantially in the 2016 survey.”
2. The Internet is not replacing a real estate agent
It should come as no surprise that NAR didn’t track buyer and seller data on Internet usage in 1981. With the World Wide Web not gaining mass popularity until the 1990’s and realtor.com introduced in 1995, the ability to view listings online and then contact a Realtor was non-existent.
When NAR first began asking questions about the Internet 21 years ago, only 2 percent of buyers used the Internet during their home search. By 2005, usage soared to over three-quarters of buyers; since 2012, 90 percent or more have gone online during the house hunt.
Despite the Internet’s ascending popularity over the past 20 years, however, buyers and sellers continue to seek a real estate agent to buy or sell a home. In NAR’s 2015 survey, nearly 90 percent of respondents worked with a real estate agent to buy or sell a home, and for-sale-by-owner transactions fell to its lowest share ever (8 percent). After peaking at 14 percent in 2003 and 2004, for-sale-by-owner sales haven’t risen above 9 percent since 2011 (10 percent).
“Realtors are the source of online real estate data, and they continue to use their real insights and local market knowledge to help bring buyers and sellers together,” says Salomone. “The preference to use a Realtor has never been stronger.”
3. Buyers have bought slightly bigger, but the pace is currently at a standstill
The typical single-family home purchased in 1981 was 300-square-feet smaller (1,700 square feet) than last year’s survey, and 2,000 square feet remains the survey high achieved in seven different years. Size hit a low point in 1985 (1,650 square feet). After gradually increasing up to the boom years, purchased homes scaled back early in the housing recovery as distressed sales and first-time buyer activity during the tax credit period made up a larger bulk of the sales and reduced the typical home size.
Recently, common claims that more homebuyers are either flocking to McMansions in the suburbs or to tiny homes less than 500 square feet are simply untrue, NAR says. Since 2011, the median size of homes bought is 2,000 square feet.
“While many millennial renters living in urban areas have sacrificed space for proximity to jobs and entertainment, they’ve so far followed previous generations by fleeing to the suburbs for larger and more affordable homes when they’re ready to buy,” adds Yun. “It’ll be interesting to see in coming years if the typical home size shrinks as baby boomers downsize, and if there’s a shift towards more young buyers opting for less space to live closer to city centers. So far it hasn’t happened.”
4. Downpayments have trended down over time – but not recently
At an average monthly mortgage rate of 10.62 percent, the typical first-time homebuyer in 1989 – the earliest NAR collected buyer data on downpayments – financed their purchase with a 10 percent downpayment; it was 23 percent for repeat buyers. As low-downpayment mortgage programs entered the marketplace and credit standards eased, the typical amount of money put down fell to as low as 2 percent for first-time buyers both in 2005 and 2006. For repeat buyers, the smallest median downpayment was 13 percent in 2012 and 2014, which is likely due to reduced equity in the home that was sold.
In recent years, downpayment amounts remained mostly unchanged, coming in at 6 percent for first-time buyers in the last two surveys and either 13 percent or 14 percent for repeat buyers in the past four surveys.
5. The home search takes longer; tight inventory slowed the pace in past two years
With the Internet and digital technology created numerous avenues for sellers to quickly and efficiently market their listings to prospective buyers, one may think the duration of the home search has decreased over time. NAR’s long-running data reveals the opposite: The typical number of weeks has actually increased since the late 1980’s.
From 1987 until 2007, a buyer typically searched seven or eight weeks before finding the property they purchased. After rising to 10 weeks in 2008, the median length increased to 12 weeks through 2013 before falling back to 10 weeks over the last two years.
“Insufficient supply levels throughout most of the country have forced recent buyers to move quicker to close on a home,” says Yun. “Until new and existing inventory ramps up to meet demand, prospective buyers should anticipate a brisk home search process with not as many homes to choose from as they may like.”
© 2016 Florida Realtors®  
Source: Florida Realtors Feed

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