Real Estate Matters

The National Association of Realtors surveys home buyers and sellers annually to gather detailed information about the home buying and selling process. These surveys provide information on demographics, housing characteristics and the experience of consumers in the housing market. Buyers and sellers also share information on the role that the real estate professionals play in the home sales process.

Answers to questions asked by buyers and sellers such a how do home buyers begin the process of searching for a home and what do consumers want when choosing a real estate professional are addressed in the survey.

Although evidence is accumulating that the economy is emerging from the “Great Recession”, there are a number of headwinds that may make the promising recovery slower and more tentative than previous business cycle expansions. Significant job loss is one of the most tangible effects of the recession. Most sectors, with the possible exception of healthcare, have recorded significant decreases in employment. The second long lasting characteristic of the recession is the loss of trillions of dollars of household wealth since 2005. With falling home equity and sharply reduced financial asset values as stock markets posted some of the steepest declines in decades. For many home owners, the equity held in their home is the largest component of their wealth. Unlike job loss, which affects a fraction of all households, the loss of wealth is broadly felt by all. However, there is evidence that households are working to strengthen their financial position by paying down debt and saving a greater portion of their paycheck. According to NAR, national savings rate increased from virtually zero to the high single digits.

In most of the country, home prices remain well below peak levels recorded in 2005 and early 2006. However, unit sales have risen in some of the areas that have experienced the steepest declining in prices, including the Sarasota area. Inventories of homes are approaching a more normal level as well as housing affordability is at record levels.

According to the Florida Association of Realtors, single family homes in November were up from a year ago by 63 percent, while condominium sales increased 130 percent for the same period.

The tax credit to first time home buyers also contributed to the increase in home sales. In fact, according to NAR, first time home buyers, typically around 40 percent of sales rose to 47 percent from mid 2008 to mid 2009.

Interestingly, eighty-five percent of sellers were assisted by a real estate agent when selling their home, selling their home for 95 percent of the listing price, and 60 percent of sellers reported reducing the asking price at least once during the process. Forty percent of sellers found their real estate agent through a referral by friends or family and 26 percent used the agent they worked with previously to buy or sell a home.

With decreasing use of some media sources, such as newspapers and magazines, home buyers are relying more on online sources and their agents to provide information. Even after looking online at properties, buyers are more likely to seek the assistance of real estate agents, according to the survey. Home buyers typically spend 12 weeks searching for a home and look at 12 before deciding on their purchase. An increasing number of buyers purchase a home they found online or through a real estate agent. Internet users spend twice as much time searching for a home and visit three times as many homes, the survey says. And, even though there has been increasing interest in foreclosures and short-sales, buyers are still wary of the complex buying process and are often dissatisfied with the property’s condition. According to the survey, 10 percent of buyers purchase a foreclosed home.

The overall finding is that the internet has become an essential and indispensible tool in the home search process with 90 percent of home buyers using it to search for homes, up 30 percentage points during the past six years. However, regardless of use of the internet in the home search process, home buyers continue to rely on the assistance of real estate professionals; 79 percent of home buyers using the internet bought their home through an agent.

Happy New Year to everyone and we all look forward to a healthy and prosperous 2010.

Cheers,

Bill Geller