The National Association of Realtors (NAR) has been publishing the results of its annual “Profile of Home Buyers and Sellers” survey since 1981. I have been following this report since the mid-2000s. So what is this survey, why does NAR spend so much time and energy compiling this information and how can this information help grow my business and my income?
First, what is this “Profile of Home Buyers and Sellers?”
The “Profile” is an average summation of responses that were received by NAR using a random geographical sampling of home buyers and sellers across the country. Every July, NAR mails a large survey (this year’s survey consisted of 128 questions) to all home buyers and sellers who finalized an owner-occupied, primary residence transaction from July 1, 2014, though June 30, 2015. They publish those results the first week of November. This year’s survey was published on Realtor.org November 5.
This year’s survey is broken down into eight chapters…
- Chapter 1: Characteristics of Home Buyers
- Chapter 2: Characteristics of Homes Purchased
- Chapter 3: The Home Search Process
- Chapter 4: Home Buying and Real Estate Professionals
- Chapter 5: Financing the Home Purchase
- Chapter 6: Home Sellers and Their Selling Experience
- Chapter 7: Home Selling and Real Estate Professionals
- Chapter 8: For Sale By Owners (FSBO)
This week I will highlight Chapters 1 – 6, Profile of Home Buyers, and next week I will highlight the Profile of Home Sellers.
Now, why does NAR spend so much time and energy tracking, collecting, and publishing this information?
In 1981, it was the first full year of the Reagan administration. Prime rate hit an all-time high of 21% and FHA / VA interest rates were 17% and 18%. NAR may have decided that so much had changed in the home buying and home selling process during the 70s, it was critical for their membership to be informed about the ever-changing business environment in the mortgage industry. For example, just think about how the electronic MLS system changed the dynamics of the flow of information. Also, the explosive growth in the number of government insured loans changed the level of required documentation and regulations slowed down the home buying and closing process. It is said that “knowledge is power” and therefore, NAR must have believed that the more direct insight they received from their customer base, the more they could assist their associates through these changes. Doesn’t this sound a lot like 2015 with TRID, CFBP, FHA 4000.1 Handbook, etc.? The biggest challenge in our profession is not if there will be a change, but how do we adapt to the change to maximize our ability to succeed? A lot has changed in the 34 years since NAR first published the results of their first survey, but one thing hasn’t changed. People still believe in the dream of home ownership. People still buy and sell homes and it is our responsibility to help them navigate through this process.
OK, so how can information help me grow my business and my income?
I believe we are in the “relationship development business.” Yes, we get paid for closing loans, but the loans are really just a byproduct of the relationships we have developed with real estate professionals and consumers. Statistically, the more established relationship, the higher the probability we will close loans. Here is a good question: can you really establish a long term relationship without it first being a partnership that is based on trust and the knowledge of what’s important to your partner? I believe NAR’s Profile of Home Buyers and Sellers can be a gold mine of information and education for anyone who is interested in expanding their network of Realtors (both selling and listing agents) and consumers in either the home buying or home selling process. Look at these quick statistics:
- 87% of the home buyers surveyed purchased their home through a real estate professional; another 8% used the services of a builder or builder agent.
- 88% of the home buyers surveyed stated they would use their agent again or recommend their agent to friends and family.
- 41% of the home buyers used their agent solely because the agent was referred to them by a friend, neighbor, or relative.
- 91% of home sellers listed their home on MLS.
- 72% of home sellers contacted only one agent before listing their home.
- 84% of home sellers said that they would recommend their agent for future services.
So, do you think if you had more knowledge of what is important to home buyers and sellers, you could really understand what is important to your Realtor partners? I know statistics can be manipulated, but if those stats listed above are true, assisting our Realtors in growing their business is critical because they control the process on both the home buying and home selling side of the equation. You want to grow your business and your income? Maybe you should start first by helping your real estate partners grow their business, one home buyer and one home seller at a time. Referral networks grow expediently… 88% of buyers and 84% of sellers will refer others to their Realtor and you are now a partner in that network. Do the math using just 40 agents on the buying side and 10 on the selling side and see how valuable that network becomes in 3 to 5 years. It all starts with knowledge and the desire to provide more value than you receive.
Highlights of 2015 Profile of Home Buyers:
- The typical home purchased was a single family detached, had 1,900 sq. ft. of living space, consisted of 3 bedrooms and 2 baths, was built in 1991 (23 to 24 years old) and sold at a price of $220,000 (which represented 98% of list price)
- First time home buyers averaged 1,620 sq. ft. at a price of $170,000
- Repeat home buyers averaged 2,020 sq. ft. at a price of $246,000
- The typical home buyer was 44 years old and had a median household income of $86,100.
- The average age of first time home buyers was 31 and their average household income was $69,400. When asked about the expected length of time they anticipated owning this home, their response was 10 years. Their new home averaged 11 miles from their previous place of residency.
- The average age of repeat home buyers was 53 and their average household income was $98,700. When asked about the expected length of time they anticipated owning this home, their response was 15 years. Their new home averaged 20 miles from their previous place of residency.
- Multi-generational households continue to represent 13% of all home buying purchases and retirement communities showed a significant increase and represented 14% of all home buying purchases (this category wasn’t even represented in last year’s survey results).
- All home buyers agreed that the biggest influence in selecting a home was its location. The top five reasons for selecting a particular property were:
- Quality of Neighborhood
- Convenience to Jobs
- Overall Affordability
- Quality of Schools
- Proximity to Friends and Family
- These are important because 53% of home buyers said that finding the right home was the most difficult part of the home buying process.
- All home buyers agreed that an efficient heating and cooling system was the most important environmental feature in selecting a home.
- Home buyers that relied heavily on using the internet and online services during their home buying process typically searched for 10 weeks before they selected their home. Home buyers who did not use the internet during their home buying process only searched for five weeks before they selected their home.
- Do you have an organized Client / Prospect follow up campaign to track potential home buyers through this 5 to 10 week period?
- If yes, does it consist of multiple methods of communication so you can effectively connect with people of every age and preferred communication styles?
WOW….this information is great, but tell me again why all these stats are important to me?
Home buyers rely on the knowledge and expertise of local real estate professionals. Expand your database real estate professionals and you expand your customer base.
Home buyers still believe that home ownership is a sound financial investment and the dream of home ownership is alive. You are part of the dream process; be excited because excitement is contagious and people liking being associated with winners.
The old real estate principle of location, location, location is still king. Home buyers end up selecting their home based on its location to areas that are important to the them. Don’t focus all your efforts on the financial aspect of a transaction; ask more questions and listen to the responses based on the emotional aspect of the achievement.
The housing stock is tight (inventories are down) and America’s housing is getting older. Most first time home buyers’ biggest concern is saving for the down payment and having a safe reserve once they purchase their new home. If the average age of a house is 23 to 24 years old and the buyer expects to live in the home 10 to 15 years, what’s the probability that their home will require some type of modernization and upgrades during their home ownership life expectancy?
Renovation financing: is it the right fit for everyone? No, but it should it be an option to most potential home buyers, allowing the home buyer to decide if they want or need to personalize and customize the purchase of their new home to maximize the comfort and enjoyment of their family. The American Dream has always been based on individual freedom and the ability to choose. Look up and read the poem that is posted on the Statue of Liberty, “The New Colossus” by the American Poet Emma Lazarus. Remember, you are an important part of the dream making process.
Stay tuned for the second part of this blog posting focusing on home sellers!
About HomeBridge Financial Services:
HomeBridge Financial Services, Inc. is a leader in home mortgages, which are our sole focus. Our team’s experience and expertise in renovation lending enable us to make the loan process fast, easy and understandable for our customers. With a renovation loan from HomeBridge you can turn a house into your DREAM home! Renovation loans are available for purchases and refinances. If this appeals to you or you desire additional information of these financing options, please reach out to me at smarshall@HomeBridge.com.