Lingering Impact of Tight Credit

Home Buyers and Sellers Survey Shows Lingering Impact of Tight Credit

Nov. 4, 2013

Although the housing market has shown a healthy recovery over the
past two years, unnecessarily restrictive mortgage lending standards are
preventing some financially qualified buyers from reaching their dreams,
especially singles and first-time buyers, according to an annual study released

The 2013 National Association of Realtors® Profile of Home Buyers
and Sellers continues a long-running series of large national NAR surveys
evaluating the demographics, preferences, motivations, plans and experiences of
recent home buyers and sellers; the series dates back to 1981. Results are
representative of owner-occupants and do not include investors or vacation

Lawrence Yun, NAR chief economist, said tight credit continues to
impact homebuyer households. “Single homebuyers have been suppressed for
the past three years by restrictive mortgage lending standards, which favor
dual-income households who are more likely to have higher credit scores,”
he said. “Not seen in this survey is the elevated level of investors in
recent years. The housing recovery would have been much weaker without
investors, who often purchase with cash.”

Sixty-six percent of buyers responding to the survey are married
couples, 16 percent are single women, 9 percent single men, 7 percent unmarried
couples and 2 percent other. In 2010, 58 percent of buyers were married, 20
percent were single women, 12 percent single men and 7 percent unmarried

The overall market share of single buyers declined from 32 percent
in 2010 to 25 percent in both 2012 and 2013. In the years up through 2010, the
market shares were stable, usually moving only one or two percentage points.

“Given that mortgage interest rates are expected to gradually
rise, we need greater access to credit for a sounder housing recovery.
Affordability conditions remain favorable in much of the country, but consumers
need access to safe and sound financing, particularly the 30-year fixed-rate
mortgage, and with low downpayment options for first-time buyers,” Yun

Fourteen percent of all survey respondents were multi-generational
households, including adult children, parents and/or grandparents. “We
don’t have historic comparisons for this finding, but added the question to
this year’s study because we’ve been hearing more about this trend from our
Realtor® members,” Yun explained. “It’s another manifestation of the
difficulty in obtaining a mortgage, in addition to slow growth in good paying

First-time home buyers* slipped to a 38 percent market share in
the past year from 39 percent in the 2012 study. The long-term average in this
survey, dating back to 1981, shows that four out of 10 purchases are first-time
buyers. “The share of first-time buyers appears to be only modestly below
normal, but we have to keep in mind that investors have been more active in
recent years, and they’re not included in these results,” Yun said.
“Historically, first-time buyers are instrumental in housing recoveries
because they help existing home owners sell and make a trade.”

The median age of first-time buyers was 31, unchanged from 2012,
and the median income was $67,400. The typical first-time buyer purchased a
1,670 square-foot home costing $170,000, while the typical repeat buyer was 52
years old and earned $96,000. Repeat buyers purchased a median 2,060-square
foot home costing $240,000.

When asked about the primary reason for purchasing, 60 percent of
first-time buyers cited a desire to own a home of their own. For repeat buyers,
16 percent wanted a larger home, 12 percent had a job-related move and another
12 percent said they just wanted to own a home of their own. Responses for
other reasons were in the single digits.

Nearly nine out of 10 buyers financed their purchase. The median
downpayment ranged from 5 percent for first-time buyers to 14 percent for
repeat buyers.

First-time buyers used a variety of resources for the loan
downpayment:  78 percent tapped into savings; 27 percent received a gift
from a friend or relative, usually from their parents; and 7 percent received a
loan from a relative or friend. Nine percent sold stocks or bonds and 8 percent
tapped into a 401(k) fund. Among entry-level buyers who said that saving for a
downpayment was difficult, 54 percent said student loan expenses delayed

Ninety-five percent of entry-level buyers chose a fixed-rate
mortgage, four out of 10 financed with a low-downpayment FHA mortgage, and 8
percent used the VA loan program with no downpayment requirements.

Eight out of 10 recent home buyers said their home is a good
investment, and 44 percent believe it’s better than stocks; 91 percent were
satisfied with the buying process. “Interestingly, 6 percent of all buyers
had previously sold a foreclosure or short sale, showing that sellers of
distressed property are beginning to recover financially,” Yun said.

The typical buyer began their home search online and then
contacted a real estate agent. Buyers searched a median of 12 weeks and visited
10 homes.

Buyers used a wide variety of resources in searching for a home.
Top results showed 92 percent used the Internet, 89 percent used real estate
agents, 51 percent yard signs, 45 percent each attended open houses and used a
mobile application, and 42 percent used mobile search engines.

When buyers were asked where they first learned about the home
they purchased, 43 percent said the Internet; 33 percent from a real estate
agent; 9 percent a yard sign or open house; 6 percent from a friend, neighbor
or relative; 5 percent from home builders; 2 percent directly from the seller;
1 percent a print or newspaper ad; and less than 1 percent from other sources.

Ninety percent of home buyers who used the Internet to search for
a home purchased through a real estate agent, as did 69 percent of non-Internet
users, who were more likely to purchase directly from a builder or from an
owner they already knew in a private transaction.

While sellers had been in their previous home for a median of nine
years, first-time buyers plan to stay for 10 years and repeat buyers plan to
hold their property for 15 years.

The biggest factors influencing neighborhood choice were quality
of the neighborhood, cited by 63 percent of buyers; convenience to jobs, 48
percent; overall affordability of homes, 40 percent; and convenience to family
and friends, 38 percent. Other factors with relatively high responses included
quality of the school district, 29 percent; neighborhood design, 28 percent;
convenience to shopping, 26 percent; convenience to schools, 22 percent; and
convenience to entertainment or leisure activities, 20 percent.

Commuting costs remain a significant factor, with 73 percent of
buyers saying transportation costs were important in the purchase decision
process. “Green” features also played a role, with 85 percent saying
heating and cooling costs were important, and 68 percent wanting energy
efficient appliances.

Eighty percent of respondents purchased a detached single-family
home, 7 percent a condo, 7 percent a townhouse or rowhouse, and 6 percent some
other kind of housing. The typical home had three bedrooms and two bathrooms.

Fifty-three percent of recent purchases were in a suburb or
subdivision, 18 percent in a small town, 16 percent were in an urban area, 11
percent in a rural area and 3 percent in a resort or recreation area. The
median distance from the previous residence was 12 miles.

Eighty-eight percent of respondents used real estate agents and
brokers to purchase a home, 7 percent purchased directly from a builder and 5
percent directly from the previous owner; 61 percent of buyers working with real
estate professionals had a buyer representative arrangement.

The typical home seller was 53 years old and their income was
$97,500. Sellers moved a median distance of 18 miles and their home was on the
market for 5 weeks, down from 11 weeks in the 2012 study. Forty-five percent
moved to a larger home, 27 percent bought a comparably sized home and 29
percent downsized. Thirteen percent of sellers wanted to sell earlier but were
stalled because their home had been worth less than their mortgage.

The typical seller, who purchased a home nine years earlier,
realized a median equity gain of $25,000, a 13 percent increase over the
original purchase price, while sellers who were in their homes for 11 to 15
years saw a median gain of $52,000, or 28 percent.

Sellers typically found a real estate agent through a referral by
a friend, neighbor or relative, or used the agent in a previous transaction,
together cited by 63 percent of respondents; 83 percent are likely to use the
agent again or recommend to others.

Like sellers, buyers most commonly choose an agent based on a
referral, or had used the agent previously, mentioned by 54 percent of
respondents, with trustworthiness and reputation being the most important
factors; two out of three buyers interviewed only one agent. Eighty-six percent
of buyers are likely to use the same agent again or recommend to others.

Of sellers working with real estate agents, the study found that
81 percent used full-service brokerage, in which agents provide a broad range
of services and manage most of the aspects of selling a home. Nine percent of
sellers chose a limited set of services, and 10 percent used minimal service,
such as simply listing a property on a multiple listing service.

Realtors® provide all of these types of services, as do non-member
agents and brokers, with similar findings for each year since questions about
brokerage services were added in 2006.

For-sale-by-owner transactions accounted for 9 percent of sales,
matching the record lows set in 2010 and 2012; the record high was 20 percent
in 1987. The share of homes sold without professional representation has
trended lower since last reaching a cyclical peak of 18 percent in 1997.

Factoring out private sales between parties who knew each other in
advance, the actual number of homes sold on the open market without
professional assistance was 6 percent. Twelve percent of all FSBOs said they
had been contacted directly by a buyer and were not actively attempting to sell
their home.

The median sales price for owners who used an agent was $230,000,
well above the $184,000 median for a home sold directly by an owner, but there
were important differences. The median income of FSBOs was $86,200, in contrast
with $99,900 for agent-assisted sellers, and they were more likely to be
selling a smaller home, suggesting a lower home value for unassisted sellers.

The most difficult tasks reported by FSBOs are getting the right
price, preparing or fixing up the home for sale, and understanding and
completing paperwork.

NAR mailed a 122-question survey in July 2013 to a national sample
of 148,011 home buyers and sellers who purchased their homes between July 2012
and June 2013, using a random sample of county records. It generated 8,767
usable responses, weighted to be representative of sales on a geographic basis;
the adjusted response rate was 6.1 percent. All information is characteristic
of the 12-month period ending in June 2013 with the exception of income data,
which are for 2012. Because of rounding and omissions for space, percentage
distributions for some findings may not add up to 100 percent.

The 2013 NAR Profile of Home Buyers and Sellers can be ordered by
calling 800-874-6500, or online at
The study costs $19.95 for NAR members and $249.95 for non-members.

Source: NAR

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