Chicago, IL – November 4, 2017 (nar.realtor) Rising home prices amidst tight inventory conditions are creating challenging conditions for home shoppers, but understanding recent buyer preferences, and becoming knowledgeable of where buyers may see the best return on their purchase over time, can ensure real estate professionals are providing irreplaceable value to help their clients achieve their goals.
That is according to speakers at a buyer preferences session organized by the REALTOR® University Richard J. Rosenthal Center for Real Estate Studies here at the 2017 REALTORS® Conference & Expo.
NAR’s Jessica Lautz, managing director of survey research and communications, discussed the characteristics of today’s successful first-time buyers and the supply and affordability obstacles they face trying to reach the market. She was joined by William Doerner, a senior economist at the Federal Housing Finance Agency, who shared insights on home price trends across the country, and explained how brokers and agents can use FHFA’s local home price indices to get a better pulse on price movements in their markets.
Lautz kicked off the session dispelling some often-repeated myths about the real estate market, including millennials not wanting to own a home, consumers buying everything online and the internet replacing word of mouth when it comes to finding a real estate agent. She explained that household formation and more sales are being driven by the growth in minority households and millennials being the largest generation.
Unfortunately, Lautz said, these factors are not translating to more sales to first-time buyers. She referenced findings from NAR’s 2017 Profile of Home Buyers and Sellers, which found that first-timers were only 34 percent of transactions over the past year, which is below the long-term historical average of 39 percent since 1981. Furthermore, those who successfully entered the market needed higher incomes, saw homes sell quickly and had difficulty saving for a down payment because of higher prices and repaying student debt.
“Low inventory remains a top struggle that is holding first-time buyers from reaching the market,” said Lautz. “Because of rising prices, successful buyers today typically have a lot higher of an income than they did 10 years ago.”
Doerner in his remarks agreed that buyer demand is holding steady, but tight inventory conditions in many areas are causing home prices to rise consistently. He explained that the good news is that new inventory is showing some signs of slowly picking up, but overall supply is still below historical levels.
“Regional price gains did taper a bit earlier this year, but our data shows that price movements really vary even within a city,” said Doerner. He said FHFA’s data on local price indices, available at www.fhfa.gov/hpi (link is external), is valuable information for real estate professionals when helping buyers understand potential areas where they can get the best value for their purchase.
Sharing insights gathered from FHFA’s price data, Doerner pointed out that price appreciation over the past 25 years has been the most sustainable in the downtown areas of large cities. Additionally, during downturns, properties closer to central business districts in larger cities have seen smaller price declines. “Our findings show that as close to the center of a city as possible can be where buyers typically get the best return on a home purchase over time,” he said.
According to Lautz, regardless of the location where home shoppers are looking to buy, nearly all go online first during their search. However, NAR survey findings show buyers overwhelmingly value face-to-face interactions, want honesty and integrity, and seek a real estate professional who can lend them their knowledge in today’s challenging housing market. That is why agent-assisted sales remain at an all-time high.
“For instance, there’s a lack of knowledge among non-homeowners about how much they need for a down payment. Eighty-seven percent of those recently surveyed said they believe you need 10 percent or more,” said Lautz. “In reality, the typical amount put down by recent first-timers was 5 percent. It’s important to really hit home with clients that low down payment programs are available to help them purchase a home.”
Added Lautz, “Ultimately, nearly all current renters consider homeownership as part of their American Dream and want to own a home in the future. A Realtor®, a member of NAR, now more than ever, is crucial to helping today’s buyers and sellers succeed.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.