Survey Reveals Why Buyers Are Waiting on Sidelines
Twenty-seven percent of Americans say they plan to buy a home in the future (with most saying in two or more years), and only two percent say they plan to purchase a home in the next 12 months, according to a new Move Inc. survey of 1,000 American adults. So why are so many buyers continuing to wait on the sidelines when home affordability is high and interest rates are at or hovering near record lows?
About 23 percent of those surveyed say they are delaying buying a home because they are concerned about the real estate market in their local area, particularly with concerns over the future of home values, the economy and jobs, as well as difficulty in saving for a down payment.
“Perceptions as much as the realities of home ownership are standing in the way of boosting demand for housing,” Errol Samuelson, chief revenue officer of Move Inc., said in a statement. “Concerns that the economy will continue to put jobs at risk and that prices won’t rise near term are keeping buyers on the sidelines as much as the difficulty they’re having in getting credit or saving for down payments. Until these concerns are resolved, we expect both buyers and sellers to remain on the sidelines.”
Nearly 35 percent of those surveyed say their inability to get credit or find affordable credit are the main reasons why they’re putting off purchasing a home.
The Move survey also found that younger adults—the millennial generation—tends to look at home ownership as a place to be happy, not an investment. But this large segment of first-time home buyers admit they are picky when it comes to finding a home—80 percent say they are picky, in fact. A lot of that pickiness comes from the fact that 75 percent say that their home defines them and is a part of who they are.
The survey also found that younger adults tend to spend more on housing than older adults. For example, the survey revealed that two out of five–or about 40 percent–of millennials say they should spend 30 to 60 percent of their gross monthly income on housing. More than half of older Americans, on the other hand, say they plan to spend less than 30 percent of their gross monthly on housing.
Lenders often recommend spending 28 percent of annual gross wages on housing, when taking into account principal, interest, and taxes.
Source: “2012 Presidential Elections: 69.6% of Americans Said Housing Will Influence Their Vote,” Move Inc. (Nov. 8, 2011)
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Bargain-Seeking Home Buyers on the Hunt
Housing prices across the country are at multi-year lows and mixed with low interest rates bargain hunters are targeting real estate.
More investors are heading to the market looking to make cash buys for real estate, investing in second or even a third home, Reuters News reports.
“We’re starting to get a lot more inquiries and assisting in transactions,” says Rocco Papandrea, a senior vice president and wealth management adviser at Merill Lynch in New York. Papandrea says he’s seeing more interest in properties along the West Coast and in Colorado, as well as Florida.
Canadian buyers in particular are expected to be looking to purchase U.S. homes. The Bank of Montreal estimates that one-in-five Canadians is considering buying U.S. property.
With dropping home prices, more cities are looking to be attractive buys, such as the increasing affordability in popular vacation-home designations along the U.S. Sunbelt. For example, home prices have fallen 44 percent in Tampa, 54 percent in Phoenix, 57 percent in Las Vegas, and 49 percent in Miami, the Bank of Montreal reports.
“If the economy keeps clicking along and jobs keep growing, housing will be fine,” says Dean Frankel, a portfolio manager at Urdang Capital Markets in Plymouth Meeting, Pennsylvania, who oversees around $1.7 billion in real estate equity investments.
The economy–and ultimately housing–may then get a boost from the latest unemployment report released Friday. The unemployment rate reached a two-year low of 8.8 percent in March as companies began a brisk wave of hiring, adding employees at the fastest two-month pace since before the recession even started, the Labor Department reports.
The unemployment rate has fallen a full percentage point in the last four months, which marks the sharpest drop since 1983.
Source: “U.S. Housing Market Attracting Bargain-Hunters,” Reuters News (March 31, 2011) and “Unemployment Rate Falls to 2-Year Low of 8.8 Pct.; Employers Add 216k Jobs in March,” The Associated Press (April 1, 2011)
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What Buyers Want in Homes Today
Buyers have a long list of what they want when home shopping, but one of their biggest desires: A good deal.
“And no matter where a seller prices their property, they’re looking to negotiate,” says Patricia Szot, president of the MetroTex Association of REALTORS®.
But that’s not all they want. Bankrate.com recently asked real estate professionals to chime in on the top desires of their buyers when home shopping. Here are four things that made the list of top home buyer preferences:
1. Homes that are in good condition. “There’s not a lot of flexibility in that,” says Ron Phipps, president of the National Association of REALTORS®. Many buyers now take the attitude: “I’d rather spend the money getting into the house” and not have to spend more money later, Phipps says. One of the major reasons is that “buyers have limited amounts of cash,” he adds. “Even if they want to do a fixer-upper, they don’t have the money to do it.”
2. A bargain with incentives. Buyers are looking for a good deal, even when considering bank-owned properties, says Joan Pratt, real estate broker with RE/MAX Professionals in Castle Pines, Colo. “They want the short sales and the foreclosures and they want them to look like they’re owner-occupied,” she says. “They don’t want to paint. They don’t want to put carpet in. They don’t want to clean.”
And they aren’t only asking for a low price but they also want incentives to buy too. As such, sellers are offering everything from gift cards for new furniture to paint to financial assistance at closing.
3. Outdoor living areas. Homes with screen porches, outdoor kitchens, two-way fireplaces are becoming increasingly competitive in the marketplace as more buyers say they want more outdoor living space.
4. Open kitchens. “The wall between the kitchen and the family room is evaporating,” Phipps says. “The kitchen is becoming part of the gathering space.” (See Buyers Want Cozy, Connected Kitchens)
Source: “9 Items Homebuyers Desire in 2011,” Bankrate.com (March 2011)
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Record-Low Rates Not Swaying Some Households
Mortgage rates are at record lows, but these rates aren’t motivating home buyers in huge numbers, nor are they successfully driving homeowners to remodel or take out money for other kinds of spending.
In previous recessions, lowering interest rates has driven the economy upward. What’s different this time around?
Mark Zandi, chief economist for Moody’s Analytics, points out that homeowners are wary. Two-thirds of any money saved is going toward paying down debt or building savings. Only a third is being spent.
“It’s going to take about three years to get back to normal,” says Patrick Newport, U.S. economist for IHS Global Insight.
Source: USA Today, Paul Wiseman, Stephanie Armour (09/29/2010)
10 Steps to Win Over Sellers
Helping eager buyers get the home of their dreams isn’t so easy in this unsettled market. Here are 10 tips for making sure sellers won’t turn up their nose at an offer:
1. Make sure the buyers are pre-approved for a mortgage (not to be confused with being pre-qualified) so they can close in about 10 days.
2. Study the buyer. Have they made an offer on another home or are they working against any other kind of deadline?
3. Make a clean offer – no requests for help with closing costs or other contingencies.
4. Include an automatic escalation clause – say $500 over the highest competing bid. (Insist that seller show the offers in writing.)
5. Sweeten the offer with a bonus if the deal gets done quickly.
6. Offer 10 percent of the purchase price in earnest money.
7. Waive the appraisal. The buyer will have to be willing to pay any difference between the selling price and what the bank is willing to lend.
8. Consider waiving the inspection.
9. Offer the full list price, preferably in cash.
10. Write a love letter to sellers, telling them all the things your client loves about their home.
Source: MSN Real Estate, Marilyn Lewis (08/03/2010)
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Comfortable Laundry Rooms Are a Must-Have
Convenient and comfortable laundry rooms are an increasingly popular feature among home buyers.
Tom Byrne, president of Rockville, Md.-based Chadsworth Homes Inc., says they are more popular than such features as studies and media rooms.
“In the past few years, 30 percent of the homes we build … have a laundry room with granite countertops, a single-level kitchen-style faucet, and the laundry tub will be an undercounter sink,” Byrne says.
Stephen Melman, director of economic services for the National Association of Home Builders, concurs.
“These rooms are becoming larger and more multifunctional, with organizers, a table for folding, ironing stations, and windows with a view,” Melman says.
Source: Washington Times, Carisa Chappell (5/14/2010)
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House Hunting Via Real Estate Apps
Smart phone apps are becoming increasingly popular among home buyers, sellers, and the real estate professionals who serve them.
Zillow.com, which has a free app, says people are using it to look up 2 million properties a month. Other popular apps include those offered by ZipRealty, Coldwell Banker, Better Homes and Gardens, and Corcoran Group.
The apps provide the same information that Web sites do, but they allow users access without having to lug a computer around.
They can make house hunting easier for both practitioners and buyers because the information is so immediately and widely available. “Within a minute, I had enough information to say it’s not worth driving” 25 miles to inspect the home, says Jon Mirmelli, a buyer who otherwise might have asked his real estate professional to meet him there.
Source: The Wall Street Journal, James R. Hagerty (03/09/2010)
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10 Home Features Buyers Want
Home designers and builders speaking at the recent International Builders Show in Las Vegas say that buyers are seeking cost-effective features and rejecting things that don’t have lasting value.
“It’s all about family togetherness – casual living, entertaining and flexible spaces,” says Carol Lavender, president of the Lavender Design Group in San Antonio.
Paul Cardis, CEO of Avid Ratings, which conducts an annual survey of buyer preferences, identified these must-haves in new homes:
1. Large kitchens with islands
2. Energy efficiency, including energy-efficient appliances, super insulation, and high-efficiency windows.
3. Home offices
4. Main-floor master suite
5. Outdoor living space
6. Ceiling fans
7. Soaking tub in the master suite and/or an oversize shower with a seating area
8. Stone and brick exteriors rather than stucco or vinyl
9. Community walking paths and playgrounds
10. Two-car garages, but three-car garages are even more desirable
Source: MarketWatch, Steve Kerch (01/30/2010)
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A Decade of Dramatic Developments
At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage.
What a difference a decade makes.
“The real estate industry has seen tremendous change and evolution over the past decade,” said NATIONAL ASSOCIATION OF REALTORS® President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, REALTORS® have not only anticipated and adapted to the evolving needs of their clients and customers, but also have influenced industry trends and innovations that will carry us into the future.”
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Buyers Should Prepare for Extra Expenses
Home buyers should be prepared for a bundle of extra costs beyond the mortgage payment.
“Some people walk away from closing with a nickel and a stick of gum, and that’s probably not going to be a good idea,” says Dale Robyn Siegel, president of Circle Mortgage Group, in Harrison, N.Y.
People whose only previous experience is renting often don’t realize how costly water, heating and air conditioning, taxes, and general maintenance can be, says Allan Glass, owner of ASG Real Estate Inc. in Los Angeles.
He estimates that buyers should have at least 1 percent of the purchase price of their home set aside for improvements and other expenses.
Source: MarketWatch, Amy Hoak (12/28/2009)
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A Decade of Dramatic Developments
At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage. What a difference a decade makes. “The real estate [...]
Low Prices Draw Investors Back to Market
Real estate investors are moving back into the market, according to a new survey from Move.com.
According to the Move.com survey, 12.1 percent of home buyers today plan to buy a home as an investment property, compared to 5.6 percent in March 2009. The survey found that 15.8 percent of those interested in investment property were men and 8.1 percent were women and 52.6 percent of the investment buyers were between ages 35 to 49.
Of the 25.3 percent of buyers who are focusing on foreclosure properties, 42 percent regard the purchase they are considering an investment and don’t plan to live in the property themselves; 13.2 percent plan to rent out the property; 11.3 percent are going to fix up the property and resell it; and 17.4 percent plan to house a family member until the property can be sold profitably.
Of the 9.8 percent of buyers who say that they plan to purchase and live in a property in the next two years, 5.4 percent plan to purchase in the next 12 months; 48.3 percent are first-time buyers; 52.8 percent are women, and 44.1 percent are men.
Buyers of investment and personal property say they are motivated by these factors:
* Prices are as low as they will go, 23.6 percent
* Foreclosure prices are a bargain, 18.7 percent
* Great selection of homes for sale in their target community, 21.2 percent
* Concerned interest rates will rise, 14.2 percent
Source: Move.com (11/11/2009)
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Six Tips to Better Online Real Estate Photographs
With a majority of home buyers looking at listings online, you would be wise to use top-quality photos in your listings. Don’t make the mistake of taking pictures of rooms without enough light, failing to focus on the room itself, or snapping photos of rooms that have not been cleaned. Dennis Huckaby, an architectural photographer [...]
Can the Industry Restore Consumer Confidence? Industry Leaders Weigh In
RISMEDIA, July 17, 2009-A few years back a Harris Poll survey found that Realtors were named among the “Top 12 Most Trusted Professionals in America.” How do American home buyers and sellers feel today? In this month’s NAR Power Broker Roundtable, industry leaders weigh in on what real estate professionals need to focus on now to restore consumer confidence and help turn the struggling markets around.
Moderator: Virginia Cook, Special Liaison for Large Firm Relations, NAR
Participants: Jon Coile, President, Champion Realty, Chesapeake Bay, Maryland;
Helen Sossa, President, Prudential Palms Realty, Sarasota, Florida; and Vince Leisey, President, Prudential Ambassador Real Estate, Omaha, Nebraska.
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The Second Homes Market in 2008.
The purchase of a vacation home or a residential investment property is influenced by many factors that are often different than the motivations for the purchase of a primary residence. Especially
during a period of weak home sales and considerable uncertainty about the economy, it is important to gauge how the economic environment is affecting each segment.
To assess the state of the vacation and investment buyers market in 2008, NAR Research recently released its latest survey of home buyers specifically addressing the motivations of second-home buyers and characteristics of the vacation and investment property market.*
Primary Residence Buyers
In 2008, 70 percent of home buyers indicated that they purchased a home to use as their primary residence, an increase from 67 percent in 2007 and up significantly from 60 percent in 2005. Most often, buyers purchase a primary residence based on job relocation needs, formation of new households or changes in family circumstances necessitating a larger or smaller home or a home in a different location. These factors are present – perhaps to a larger or smaller degree – whether the economy is expanding or contracting. Consequently, sales of primary residences fell by 13.2 percent, somewhat less than the 16 percent decline in the combined sales of existing and new homes, overall.
Vacation Home Buyers
For the remaining 30 percent of home buyers, the motivation to purchase an investment property or vacation home is influenced by a variety of factors. In an environment of economic uncertainty, discretionary purchases such as vacation homes can be more easily delayed than the purchase of a primary residence as evident from the decline in the share of vacation home purchases to 9 percent in 2008 from 12 percent in 2007.
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Finding the Best Mortgage Deal Takes Work.
Home buyers who investigate mortgage options themselves as opposed to using a broker are likelier to get a better deal, according to a study for the Department of Housing and Urban Development published last year.
The study found that borrowers paid about $300 to $425 more in fees when they worked with a broker as opposed to working directly with a lender.
But comparison shopping can be tricky. Home buyers should try to devote a whole day to comparison shopping and include at least one credit union, a community bank, multiple national banks and an investment firms.
They should compare one type of loan at a time–for instance, a 30-year, fixed rate with no points. Their research should include a request for a guarantee that both the rate and the good-faith estimate will be exactly as initially presented. This standard could be difficult for a buyer to find, but it’s worth trying to find it, experts say.
Source: The New York Times, Ron Lieber (04/04/2009)
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First time home buyers, tax credit explained!
The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.
Full details in a printable document,save and keep;
and printable First-Time Homebuyer Credit forms from the IRS.
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Finance options for Buyers
Fixed-Rate Loans The fixed-rate mortgage is the most popular mortgage program in use today. Fixed-rate loans offer the borrow a fixed interest rate for the life of the loan, typically 15 to 30 years. Borrowers have peace of mind knowing that their monthly payment will not change over time. Conventional fixed-rate mortgages have underwriting requirements [...]