- Today the National Association of Realtors released its 2016 Profile of Homebuyers and Sellers, a 144-page report detailing the characteristics and demands of today's real estate consumers.
- In 2016, 90 percent of buyers and sellers used an agent during the real estate transaction.
- Despite depressed levels of first-time buyers after the Great Recession, younger generations are back to making homeownership headway. Their future success will depend on affordable housing supply in coming years and income growth.
- The No. 1 quality consumers look for in an agent is honesty/integrity.
As the National Association of Realtors’ annual Profile of Home Buyers and Sellers marks its 35th birthday today, real estate agents have something to celebrate, too: three and a half decades later, despite a major recession and the dawn of a little something called the internet, their relevance to consumers appears to be as strong as ever.
The 2016 report shows that the release of once-locked data to home search sites and the need for an expert to guide this major financial transaction are not mutually exclusive.
With nearly 90 percent of all respondents reporting that they worked with a real estate agent to buy or sell a home, the challenge for agents in the future won’t be convincing clients of their value but navigating the market’s ebb and flow and providing a seamless process worth bragging about.
Here are some of the report’s main takeaways.
Buyer characteristics: First-timers and single women make a comeback
The millennial generation was hit particularly hard by the Great Recession as they graduated college and sought jobs in the heart of the economic downturn.
This had a startling effect on first-time homebuyer purchases, which continued to decline in 2015 to a 30-year low of 32 percent.
That percentage ticked up to 35 percent in 2016, the highest since 2013 (38 percent), which could represent a light at the end of the tunnel for younger buyers.
This year, those under 35 made up 61 percent of first-time buyer transactions.
NAR Chief Economist Lawrence Yun explained the potential rebound in a statement: “Young adults are settling down and deciding to buy a home after what was likely a turbulent beginning to their adult life and career following the Great Recession,” he said.
“Demand increased over the past year because of a robust job market for those with a college degree and renter fatigue at a time when homeowners continue to see their equity rise. These factors were why more first-time buyers (67 percent) said a desire to own a home of their own was the primary reason for their purchase (64 percent in 2015; 53 percent in 2014).”
Added Yun, “Even with the affordability challenges many buyers face, the allure of homeownership is not lost among the younger generation.”
Will first-time buyers continue to make a comeback into 2017? That depends on whether the supply of affordable housing catches up to demand and the rate of income growth, all of which is yet to be seen, Yun said.
For the third year in a row, the typical homebuyer in NAR’s survey was 44 years old. The median household income continues to increase, rising this year to $88,500.
No surprise: Married couples made up the largest homebuyer share (66 percent) with the highest income ($99,200).
But household composition data show that single women are making headway on the homebuying scene, more so than their male counterparts.
This year, single females were responsible for 17 percent of total home purchases, up from a low of 15 percent last year and compared to only 7 percent of single men in the same category.
“Despite having a much lower income ($55,300) than single male buyers ($69,600), female buyers made up over double the amount of men (7 percent),” Yun added in the survey announcement. “Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family.
“With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women.”
What buyers want in an agent
Modern real estate agents are still an integral part of the home search process.
According to the survey, 92 percent of buyers in 2016 relied on an agent as a resource during the home search process as a whole, and that’s not just to negotiate and deal with the paperwork side of the deal — in fact, half of all buyers want help from their real estate professional in finding the right home to purchase.
Moreover, 88 percent of buyers purchased their home through an agent or broker (6 percent did so from a builder or builder’s agent).
How are buyers deciding which agent is right for them? Word of mouth reigns, with 42 percent of buyers using an agent that was referred to them by a friend, neighbor or relative.
And although 88 percent of buyers would recommend their agent to others or use their agent again, only 11 percent went with a someone they had worked with in the past. About 70 percent of buyers interviewed only one agent.
Trends in home search
Buyers who don’t use the internet as a resource to find a home are in the narrow minority in 2016, with 95 percent of home shoppers going online at some point during the process.
The following trends also shape the current state of home hunting:
- Nearly half (44 percent) look for homes online as a first step; only 17 percent of buyers contact a real estate agent first.
- A strong majority (79 percent) find their agent to be a “very useful” resource, thought online sites were seen as most useful at 89 percent.
- The home search process is getting longer. Today, it takes about 10 weeks and 10 homes, compared to 7 weeks in 1987.
- The reason for the extended home search period may be the appearance of more options on the internet — average buyers who didn’t go online spent only four weeks searching (and looked at four homes).
- Both photos and listing information about properties remain critical buyer resources.
- Sixty percent of recent buyers were “very satisfied” with their homebuying process (a modest uptick from 59 percent in 2015).
NAR president Tom Salomone weighed in: “Regardless of the plethora of online resources readily available at the click of a mouse or the swipe of a thumb, consumers serious about buying a home continue to seek the expertise and market insights that only a Realtor can provide.
“Given the numerous competitive markets with minimal supply, it’s no surprise that both first-time and repeat buyers sought an agent for assistance finding the right home and negotiating the terms of the sale.”
Today’s sellers: looking for bigger, better housing
NAR’s profile also shed light on the 2016 seller, who since 2014 has been 54 years old. The typical seller household brings in $100,700, down slightly from $104,100 in 2015, and has lived in the property for a decade before moving on.
Equity numbers were up this year — sellers earned a median equity gain of $43,100 ($40,000 in 2015), or 24 percent over the original purchase price, a number that grew as the number of ownership years increased. (For context, equity gains fell to 3 percent during the Great Recession.)
The primary reasons for selling included:
- Home too small (18 percent)
- Want to move closer to friends and family (15 percent)
- Job relocation (14 percent)
What sellers want in an agent
The same opportunity for gaining clientele as a buyer’s agent applies to the seller realm: 85 percent of sellers indicated they would recommend their agent (and most of them have done so twice) or use him or her again, and nearly two-thirds of sellers in the survey found their agent by referral or a past transaction.
The vast majority of sellers (92 percent) list their home on the MLS, which stands as the No. 1 listing source, and 77 percent reported providing the agent’s compensation.
Salomone added: “Although the imbalance of supply in relation to demand in recent years continues to put many sellers in the driver’s seat, they’re still looking for a Realtor now more than ever to price their home competitively, market their home to the widest number of eyes possible and ultimately help close the deal within a given timeframe.”
For the second consecutive year, 89 percent of sellers went through an agent; as such, the share of for sale by owner transactions hit record lows in 2016.
Among both buyers and sellers, the top three most important real estate agent skills and qualities include honesty and integrity, responsiveness and knowlege of the purchase process.
About the survey
According to NAR, here’s how the survey was conducted:
“NAR mailed a 132-question survey in July 2016 using a random sample weighted to be representative of sales on a geographic basis to 93,171 recent home buyers. Respondents had the option to fill out the survey via hard copy or online; the online survey was available in English and Spanish. A total of 5,465 responses were received from primary residence buyers. After accounting for undeliverable questionnaires, the survey had an adjusted response rate of 5.9 percent. The sample at the 95 percent confidence level has a confidence interval of plus-or-minus 1.32 percent.
“The recent home buyers had to have purchased a home between July of 2015 and June of 2016. All information is characteristic of the 12-month period ending in June 2016 with the exception of income data, which are for 2015.”
