A Message from the President with Mike Theo: NAR Study

 Mike Theo  |    November 08, 2013

A business‚Äôs success ‚ÄĒ any business really ‚ÄĒ depends mightily on knowing who your customers are and what they want. Real estate is no different. That‚Äôs what makes the National Association of REALTORS¬ģ (NAR) annual profile of home buyers and sellers so valuable. And given the tumult of the Great Recession, knowing who they are and what they want is critical for all REALTORS¬ģ.¬†

NAR’s new report covers 2012 and describes a market showing signs of stabilization but characterized by tightening credit standards and inventories. Despite improving employment, retail and auto sales, as well as rising consumer confidence, the overall economy remained sluggish showing only timid growth. And most buyers, while they understand the financial benefits of homeownership, still purchase a home for the benefits to their family and their community.

About today’s buyers 

So who’s buying today? Nearly 40 percent of buyers are first timers, about the historic norm, with a median household income of $61,800. Repeat buyers had family incomes of about $93,000. The typical buyer is younger and tends to be married. The age of a typical buyer is now 42 years old, down from last year’s 45 years old. Two thirds of recent buyers were married couples, the highest share since 2001, and only 16 percent were single females, the lowest share since 2001.

What are they buying? The typical home purchased was 1,900 square feet with three bedrooms and two bathrooms, and 79 percent were detached single-family homes. New home purchases were still down, just 16 percent of all recent home sales. The top factors influencing buyers included the quality of the neighborhood, located near work and overall housing affordability. 

The Internet continues to play an important role in today‚Äôs market: 90 percent of buyers surveyed said they used the Internet during their home search process ‚ÄĒ rising to 96 percent for buyers under the age of 44. To begin the process, 41 percent said they started their home-buying process looking online at properties. The typical buyer searched for 12 weeks and viewed 10 homes.¬†

Most buyers used a real estate professional. Nearly 90 percent of buyers purchased their home through a real estate agent or broker ‚ÄĒ a share that has increased from 69 percent in 2001. 40 percent of buyers found their agents through referrals from a family member or friend; 10 percent used the agent they used before. And buyers had a good experience, with 9 out of 10 saying they would use their agent again or recommend them to others.

Regarding financing, 87 percent of buyers financed their purchase ‚ÄĒ 96 percent of first timers and 81 percent of repeat buyers. About half said they made financial sacrifices to make their purchase happen, such as reducing spending on entertainment, clothing or luxury items. 23 percent said they found the mortgage application and approval process at least somewhat more difficult than expected, with 17 percent saying it was much more difficult than expected.

About today’s sellers

The recent trend of people staying in their homes longer continued. A typical seller in 2012 had lived in their home for nine years. In 2007, this time frame was only six years. 46 percent traded up to more expensive, larger homes and 62 percent purchased newer homes. 89 percent of sellers used an agent, typically selling their homes for 95 percent of the list prices. However 60 percent said they reduced that list price at least once. 40 percent of sellers offered incentives to attract buyers, most offering home warranties or help with closing costs.

Nearly two-thirds of sellers only contacted one agent before selecting them, with 38 percent finding their agents through referrals. 23 percent used the agent they had previously used to buy or sell a home. 93 percent reported that their home was listed or advertised on the Internet. For sellers who used an agent, 84 percent reported they would use them again or recommend them to others ‚ÄĒ 66 percent said they definitely would.

And what about FSBOs? 9 percent of sellers were FSBOs, 33 percent of whom said they knew their buyer prior to the sale. If they sold to someone they didn’t know, the primary reason (43 percent) was to avoid paying a fee or commission. But the typical FSBO home sold for $174,900, compared to $215,000 among agent-assisted homes.

Some of these facts reinforce past trends, but some are new and worth watching. And it’s worth remembering that these are national statistics. Still, when it comes to success in business, especially real estate, knowing who your consumers are and what they want can make all the difference in the world.

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