The housing market between now and thirty years ago has changed dramatically. The National Association of Realtors (NAR) has been keeping track of the adjustments from then until now through their Profile of Home Buyers and Sellers survey. With that much data in hand, here are some real estate trends they’ve noticed over time worth noting for anyone involved in that business.
First Time Buyers At Near Record Low – According to the latest numbers, first-time home buyers currently sit at approximately 32 percent of the overall market. That particular share hasn’t been this low since 1987 according to the NAR. Regarding looking at the variables leading to such low entry, the group asserts that student debt, underemployment, problems with down payment saving, as well as waiting for marriage and children are the prime reasons why first-time entry has hit this current lull. Even though market shares spiked in 2009 and 2010, due to the first-time buyer tax credit available then, the long-term average has stayed at 39 percent based on the survey data. Realtors though suspect that this current lull is only temporary and that as Millennials keep paying down student debt and saving for down payments, the market share will inevitably rise again.
Real Estate Agents Aren’t Going Anywhere – Another significant advancement that occurred during the NAR’s survey period was the internet’s growth. To provide context, in 1995, only 2 percent of potential buyers actively looked for homes using the internet. Only ten years later, that number spiked to 75 percent, and at this point sits comfortably at 90 percent. The rapid adoption of the internet in home searches cannot be denied. However, even though searches have skyrocketed, the actual processes of buying and selling homes still rely primarily on real estate agents. Because of the complexity of both processes, many buyers still prefer sticking with professionals to aid in listing and closing sales. This insight is supported by the fact that only 9 percent of homes listed for sale are done by the owner alone, without real estate agent aid.
Down Payments Have Shrunk Over Time – Going back to 1989, the average down payment amount for a first-time buyer was approximately 10 percent of the listed price. For repeat buyers, it was typically double that amount. However, by 2005, for first-time buyers, the average dropped down to a mere 2 percent. The broad availability of subprime mortgages at that time could indeed be seen as a factor why so many homes were bought despite putting down so little money up front. Since the housing crisis, though, there has been an uptick in greater saving with first-time buyers now putting down an average of 6 percent, while repeat buyers tend to hover at 13 percent. Even though we are not back at 1989 numbers, it appears that many people learned hard lessons during the crash and are working not to repeat them again where possible.
Home Searches Are Taking Longer – Today versus nearly ten years ago, the amount of time it took for home buyers to find a property they like and want to purchase has increased substantially. In 2007, it would take someone around eight weeks maximum to find a home they want and begin the purchasing process. Today, that time has increased to 10 weeks. A primary reason for that is a noticeable lack of supply compared to 8 years ago. After the housing crash, many investors snatched up foreclosures and short sales and turned them into rentals. That purchasing streak dramatically lowered the supply of first-time homes available to new buyers, especially Millennials in the meantime. Couple that with construction rates that are still recovering and you have the increased wait time buyers now face. Until overall inventory recovers and increases, consumers are forced to search longer and move even quicker to close on a home they want.
For investors, these real estate trends are worth noting as they provide a context in an industry that’s been through a rollercoaster over the past few years. One thing that stays constant though is protecting your investments from liability and securing your financial future. Being able to maintain control of your properties, while keeping them out of harm’s way from potential creditors is crucial. At Anderson, we understand those issues because we have worked with real estate investors for decades. As such, we keep abreast of any changes in the legislature that can affect you and your investments either positively or negatively. If you aren’t maintaining an eye on how the government can affect your real estate business, then you’re taking a real risk. Contact us today for a free 30-minute strategy session if any of these issues could have an impact on your business now.