- NAR released a summary of existing-home sales data showing that housing market activity rose for the third straight month. November’s existing-home sales reached the 5.61 million seasonally adjusted annual rate and existing-home sales are up 15.4 percent from a year ago.
- The national median existing-home price for all housing types was $234,900 in November, up 6.8 percent from a year ago.
- Regionally, all four regions showed growth in prices from a year ago, with the South leading at 9.2 percent. The West had an increase of 8.5 percent, and the Midwest followed with a 6.5 percent increase. The Northeast had the smallest gain of 3.3 percent from November 2015.
- From October, two of the four regions experienced inclines in sales with the Northeast having the biggest increase of 8.0 percent. The South followed with a gain of 1.4 percent. The West had a decline of 1.6 percent while the Midwest had the biggest decline of 2.2 percent.
- All four regions showed a double digit increase in sales from a year ago with the West leading all regions with a 19.0 percent gain. The Midwest followed with an 18.8 percent gain. The Northeast had a gain of 15.7 percent and the South had the smallest increase of 11.6 percent. The South led all regions in percentage of national sales at 39.6 percent while the Northeast has the smallest share at 13.4 percent.
- November’s inventory figures are down 8.0 percent from last month to 1.85 million homes for sale and the level remains below historical averages. Inventories are considerably down, 9.3 percent, from a year ago. It will take 4.0 months to move the current level of inventory at the current sales pace. It takes approximately 43 days for a home to go from listing to a contract in the current housing market, down from 54 days a year ago.
- Single-family sales declined 0.4 percent while condos inclined 10.0 percent compared to last month. Single-family home sales inclined 16.2 percent and condo sales were also strong up 10.0 percent compared to a year ago. Both single-family and condos had an increase in price with single-family up 6.8 percent at $236,500 and condos up 5.8 percent at $222,600 from November 2015.
The inventory of homes for sale continues to shrink. There were 2.02 million homes listed for sale at the end of October, representing only 4.3 months’ supply. A balanced market would be closer to 6-to-7 months’ supply. From a year ago, the raw inventory count was down 4%, which marked nearly two straight years of decline.
This shortage of housing inventory is the principal reason why home prices have been outpacing people’s income growth for the past five consecutive years. From 2011 to 2016, the median home price will have risen by 42% compared to the median household income gain of only 17%. Such disparity hurts affordability and is unsustainable over the long haul. The only way to lessen home price growth is to bring in more supply. It cannot be a simple case of existing homeowners listing their home. Keep in mind that nearly all home sellers are also home buyers, and thereby not truly providing a net increase to the inventory. The same logic applies to underwater homeowners who come above water after home price gains. What is needed is for homebuilders to boost construction and/or for investors who bought for the purpose of renting to unload those rental properties onto the market soon. There is no indication of the second occurring because of nice rental income flows. The only way to bring additional supply, therefore, is for homebuilders to get really busy.
View NAR Chief Economist, Lawrence Yun’s full article here.
NAR Research began tracking closing delays following the implementation of the TRID or Know Before You Owe rules. These rules changed the settlement process adding new closing documents, tolerances for fees, and timelines.
The time-to-close a loan, the period from contract to settlement, fell 0.3 days in November relative to the same time in 2015, the first decline on a 12-month basis in nearly two years. However, the November reading was relative to high reading in November of 2015 following TRID’s implementation. Comparing this past November with the same period in 2014 yields an increase of 4.4 days, a surprise relative the recent easing pattern.
Many of the loans that settled in November went under contract during the busy September and October period. More recently, mortgage rates rose nearly 50 basis points in November in the wake of the Presidential election. As a result, many fence-sitting home buyers and refinancers moved into the market. The extra demand may have exacerbated a bulge in early fall contracts.
The time to close a loan remains elevated, though. As depicted above, the time-to-close averaged 40.5 days from November of 2015 to November of 2016 compared to 36.7 days in the prior 12-month period. These delays should ease in the coming months as refinance volume eases and as lenders continue to adapt to the new settlement process, but a longer average time-to-close may be part of the new normal.
Student debt has grown significantly in recent years and with it concern over the impacts on first-time homebuyers. However, limited to no attention has been paid to the connection between student debt and constrained supply. A significant share of owners with student debt report that their student debt has or will delay their trade-up purchase. This problem also holds back entry-level supply from would-be first-time buyers. While increased trade-up sales would help to ameliorate tight entry-level supply, a number of constraints remain including negative equity and limited construction which must be addressed to fully solve the supply shortage.
First-time homebuyers face issues with student debt, tight credit, a soft job market, and limited housing supply. Higher student debt levels constrain first time buyers by raising their back-end debt-to-income ratio and by making it more difficult to accumulate a down payment. However, student debt also impacts current homeowners by limiting funds to build up a trade-up down payment, to pay down negative equity, and to service debts thereby affecting credit scores. According to NAR’s Student Loan Debt and Housing Report 2016, 31 percent of homeowners who have student debt report that their student debt has caused them to delay their next home purchase and 73 percent indicated the delay was 3 or more years. This means that each year, a certain number of trade-up sales do not occur, limiting the available supply for would-be first time homebuyers.
How significant is the problem?
Price growth has been strongest at the entry-level portion of the market due to low supplies as depicted in the chart of months supply below. This imbalance suggests that the market would readily absorb an increase in entry-level supply.
The number of delayed trade-up sales is depicted in the table below. The market impact may be sensitive to the turnover rate, so a range of estimates is provided. This analysis suggests that each year roughly 107,000 to 131,000 repeat sales do not occur due to student debt. However, these trade-up sales release supply, likely entry-level supply, to the market that could be consumed by first-time buyers (or investors/renters). Thus the total impact is closer to double this figure.
Trade-up buyers would likely move into price-points in the market with more supply and where builders are more likely to meet demand though land, labor, financing, and regulatory issues constraint builders at all price points. However, not all trade-up buyers may find the “right” home in the current market of tight supply.
Where Does Student Debt Constrain Supply?
At the local level, the states with the highest level of owners with student debt held back from a trade-up purchase are in California, Texas, New York, Florida, and Ohio. These areas tend to have large populations, but some are also hot-spots for younger buyers.
Implications for First-Time Buyer Share
NAR’ Profile of Home Buyers and Sellers revealed that the first-time buyer share jumped from 32 percent in 2015 to 35 percent in 2016. An increase in entry-level inventory would likely result in greater first-time buyer participation and it would ease price pressure in this segment. If trade-up demand were to rise as estimated above and all current owner’s homes sold to first-time buyers, the first-time buyer share would rise to a range of 35.6 percent to 35.7 percent, still well off the 40 percent historic norm for primary residence buyers. Over 5 years, this could increase first-time homebuyer sales by 550,000 to 700,000 and total sales could rise by 1.1 to 1.4 million in the short term. 
However, student debt is not the only factor impacting entry-level supply. Nearly 3.2 million owners remain underwater and the share of underwater owners is higher in the entry-level price range. Furthermore, investors bought up a significant number of entry-level units in the wake of the great recession turning those properties into profitable rentals that are not likely to return to the market. Finally, builders remain constrained as noted above. While an increase in supply due to higher trade-up purchases might help to ameliorate the supply issue, it would not resolve it.
The impact of student debt on first-time buyers’ finances has been widely discussed. Student debt also has an impact on entry-level supply and the trade-up process. Addressing student debt will pay dividends on both the demand and supply side for housing.
 These estimates are conservative in that they do not include private loans.
 One might argue that this purchase delay simply shifts demand into the future. However, it could cause price and construction distortions in the short term and limits the equity accumulation of owners in the short-term and long-term as this delay is persistent.
Every month NAR produces existing home sales, median sales prices and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.
The data below shows what our current month data looks like in comparison to the last ten October months and how that might compare to the “ten year October average” which is an average of the data from the past ten October months.
- The total number of homes sold in the US for October 2016 is higher the ten year October average. Regionally, all four regions were above the ten year October average, while the Midwest and South led with stronger sales.
- Comparing October of 2006 to October of 2016 fewer homes were sold in 2016 in the US and all regions, the Northeast enduring the biggest decline of 29.9 percent. The US had a drop of 11.8 percent while the West had the smallest drop in sales at 2.3 percent over the ten year period. The South led all regions in sales in 2006 and 2016.
- This October the median home price is higher than the ten year October average median price for the US and all four regions. The West led all regions with 22.8 percent followed by the South with 18.7 percent. The Midwest was higher by 16.4 percent and the Northeast was above the average by 4.3 percent.
- Comparing October of 2016 to October 2006, the median price of a home increased in all regions. The South led all regions with a gain of 10.0 percent followed by the Midwest with 9.3 percent. The US had an incline in price of 6.1 percent while the Northeast had the smallest gain of 0.8 percent and the West experienced a modest gain of 1.2 percent.
- The median price year over year percentage change shows that home prices began to fall in 2008 nationally, and prices dipped by double digits in 2008 in the West which had the biggest decline of 17.7 percent. The trend for median home prices turned around completely in 2012, when all regions showed price gains. The West had the biggest price increase of 21.7 percent and the US showed 10.0 gains. The following year, 2013, price growth rates peaked and the West had the largest gain in price of 16.2 percent, while the Northeast had the smallest gain at 5.9 percent from 2012 to 2013. This October the West (7.8%) had the highest year over year price change over the US and the other three regions. Even though prices fell and rose dramatically over the ten-year time period, if we average year over year changes over that time, prices grew less than one percent on average each year for the US and three regions and were down on average only in the Northeast. The US and the South had an average gain of 0.4 percent per year. The Midwest had an average gain of 0.7 percent per year and the West had the biggest gain of 0.8 percent per year. These average gains were computed by averaging the year over year changes. Because these year over year changes apply to different home values each year we can find an average decline in the Northeast event though prices in October 2016 were higher than October 2006 prices in that region.
- There are currently fewer homes available for sale in the US this October than the ten year October average. This current October the US had the fastest pace of homes sold relative to the inventory when months supply was 4.3 months. In 2007 the US had the slowest relative pace when it would have taken 10.6 months to sell the supply of homes on the market at the prevailing sales pace. Relative to all supply, the condo market had the biggest challenge in 2008 when it would have taken 12.7 months to sell all available inventory at the prevailing sales pace.
- The ten year October average national months supply is 7.1 while single family is 6.9 and condos are 8.5 months supply.
- Prices fell the October average year over year percentage change averaging out price change over the ten years prices are up less than one percent for the US and three regions and down in the Northeast.
View the full Oct 2016 EHS Over Ten Years slides.
In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members the characteristics of the most recent sale that closed in the reference month, including “Did the buyer purchase the property as an investment property?”
Investment sales made up 13 percent of sales in October 2016 (14 percent in September 2016; 13 percent in October 2015). At their peak in 2009, investment sales were 25 percent of sales. Purchases for investment purposes have generally been on the decline, with fewer distressed sales on the market and with home prices rising to levels that make the purchase less attractive as an investment. Also, low mortgage rates are less of a benefit to investors since many of them use cash to purchase a home.
Distressed sales accounted for five percent of sales in October 2016 (four percent in September 2016; six percent in October 2015). Foreclosed properties were four percent of residential sales, while short sales were only one percent of residential sales. With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for about a third to half of sales until 2012 when they began to fall below this level.
As the shares of investment and distressed sales to total sales have declined, so has the share of cash sales. Purchases that were financed with cash were 22 percent of sales in October 2016 (21 percent in September 2016; 24 percent in October 2015. Buyers of homes for investment purposes, distressed sales, second homes, and foreign clients are more likely to pay cash than first-time home buyers.
 The survey asks respondents who had a sale in the month to report on the characteristics of the most recent sale closed.
At the national level, housing affordability is up from a year ago for the fourth consecutive month. Mortgage rates dipped and stood at 3.76 this October but they are already higher for current home shoppers.
- Housing affordability increased from a year ago in October moving the index up 0.5 percent from 169.4 to 170.2. The median sales price for a single family home sold in October in the US was $233,700 up 5.9 percent from a year ago.
- Nationally, mortgage rates were down 29 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose 2.7 percent.
- Regionally, the West had the biggest increase in price at 7.6 percent. The South had an increase of 6.9 percent while the Midwest had a 5.7 percent gain in price. The Northeast had the smallest increase of 2.8 percent.
- Regionally, two of the four regions saw increases in affordability from a year ago. The Northeast had the biggest increase of 3.5 percent. The Midwest had a modest increase of 0.8 percent. The South had a decline in affordability of 1.8 percent while the West had a decline of 0.5 percent.
- By region, affordability is up in all regions from last month. The Midwest had the biggest increase of 3.8 percent. The Northeast followed with a gain of 3.2 percent and the South had a gain of 2.6 percent. The West had the smallest increase in affordability of 0.3 percent.
- Despite month to month changes, the most affordable region is the Midwest where the index is 216.9. The least affordable region remains the West where the index is 120.4. For comparison, the index is 173.5 in the South, 178.5 in the Northeast.
- Mortgage applications are currently down this week and while rates remain low from a broad historical perspective, they have increased notably from the lows seen as recently as just before the election period. These housing affordability numbers reflect those lower mortgage rates, but we can expect to see these higher mortgage rates dampen housing affordability in the months ahead. Job creation is steady and will help stabilize consumer confidence going forward. More inventory and new home creation will help tame home prices which are still growing faster than incomes.
- What does housing affordability look like in your market? View the full data release here.
- The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.
Home buyer demographics change slightly from year to year due to macroeconomic forces from the health of the economy to inflation to the global trade on oil prices. The National Association of REALTORS® recently released its 2016 Profile of Home Buyers and Sellers report and the trend of purchasing up in home size has continued again this year.
First, in all regions of the country, the desire to own a home of one’s own continues to dominate as the top reason for purchasing a home, almost three times as much as any other reason to purchase. Nationally, the desire to purchase one’s own home was 31 percent of all buyers, followed by the desire for a larger home (10 percent), a job-related relocation or move (eight percent), and a change in family situation (eight percent). For first-time buyers, the desire to purchase one’s own home was 67 percent.
In five out of nine regions in the United States, buyers continued to trade up and buy bigger homes than last year. According to the 2016 report, 46 percent of all buyers traded up in the size of their home, up from 42 percent in 2015. In the 2015 report, buyers reported that they were looking for homes similar in size at 29 percent compared to 26 percent in 2016.
The top regions that continued to trade up in size were New England, East North Central, South Atlantic, Mountain, and Pacific. Interestingly, share of buyers that traded up in size in West North Central last year, in contrast, went back down to six percent in 2016 (similar to 2014) from 13 percent in 2015. The regions with the share of buyers that traded up in 2015 but fell slightly in 2016 include the Middle Atlantic, East South Central, and West South Central.
While these regions where the share may have dropped a few percentage points, the desire for a larger home was still the second most frequently cited reason in almost every region. The only exceptions were in the West North Central that cited the desire to be closer to family, and the West South Central that cited a job relocation as the second most common reason to purchase a home.
One reason for this shift in purchasing power is that people have more equity from selling their previous homes in order to buy a bigger one. Since the housing downturn in 2010, many homes were worth less than their mortgages. Over the last several years, home prices have been rising. In 2014, 17 percent reported waiting or stalling to sell their home, which dropped to 13 percent in 2015 and again to 12 percent in 2016. Sellers also reported that they sold their homes for a median of $43,100 more than they purchased it, up from $40,000 in 2015 and $30,100 in 2014. The most common reason for selling a home in 2016 was that the home was too small at 18 percent, up from 16 percent in 2015.
The typical seller in 2016 was 54 years old (same as the last two years) and the median household income in 2015 was $100,700, down from $104,000 in 2014. Sellers aged 35 to 44 years were the largest age group to sell homes last year at 22 percent. We can speculate that the sellers probably had a child in the last few years and wanted a bigger home to expand their family. We also see the trend where repeat buyers have been able to sell their homes at a higher price in order to trade up and purchase larger homes. Sellers aged 55 to 64 also made up 22 percent of all sellers, possibly looking to downsize to a smaller home as they near retirement.
In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members the characteristics of the most recent sale that closed in the reference month, including “Was the buyer a first-time buyer?”
The share of first-time home buyers accounted for 33 percent of residential sales in October 2016 (34 percent in September 2016; 31 percent in October 2015), the fifth consecutive month the share has held at above 30 percent. Sustained low mortgage rates and job growth are likely underpinning the sustained, albeit modest, increase in homebuying by first-time buyers. The 30-year fixed mortgage rate has stayed below four percent since August 2015, while the unemployment rate has hovered at or below five percent since October 2015.
Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 31 percent of residential buyers in October 2016, (31 percent in September 2016; 28 percent in October 2015). The share of buyers 34 and under has been on an uptrend from the 26 percent share in July 2013 when this information was first collected in the survey.
Homebuyers who were renting prior to their recent home purchase accounted for 42 percent of sales (41 percent in September 2016; 36 percent in October 2015). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in September 2014 when this information was first collected.
 First-time buyers accounted for 35 percent of all home buyers based on data from NAR’s 2016 Profile of Home Buyers and Sellers (HBS), up from 32 percent in 2016. The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.
 Average contract rates on 30-year conventional mortgages reported by Freddie Mac, downloaded from Haver Analytics. The unemployment rate is among the population 16+ years old from the Burea of Labor Statistics, downloaded from Haver Analytics.
 NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 28 percent were 18-34 years old. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.
 NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and also captures purchases for investment purposes and vacation/second homes.
Since 1997, the Profile of Home Buyers and Sellers has collected data on the sources of buyers’ downpayment for when they purchase a home. This year, 88 percent of all buyers financed their home and 98 percent of buyers ages 18 through 44 financed the home. All buyers financed a median of 90 percent of the mortgage and had a median downpayment of 10 percent. For first-time buyers, the median percent financed was 94 percent and they put down six percent. For repeat buyers, they financed 86 percent and put down a median of 14 percent.
In 2016, 61 percent of all buyers used savings for the downpayment, compared to 76 percent for first-time buyers and 53 percent of repeat buyers. Thirty-five percent of all buyers used the proceeds from the sale of a primary residence for the downpayment, compared to only two percent of first-time buyers (who may have inherited the home) and 52 percent of repeat buyers. Thirteen percent of all buyers used a gift from a relative or friend, 24 percent for first-time buyers, and eight percent for repeat buyers.
Comparatively in 1997, 70 percent of the downpayment for first-time buyers came from savings, none from the sale of another residence, and 25 percent as a gift from a friend or relative. Savings remained the number one source of the downpayment for first-time buyers over the course of two decades. In 2003, savings dropped to only 60 percent as a source of the downpayment and 61 percent in 2009, the two lowest points on the timeline. Savings was at a peak as a source of the downpayment in 2014 and 2015 when it hit 81 percent for first-time buyers. As for a gift from a friend of relative as the source of the downpayment, this share remained relatively flat over 20 years, dropping to to 22 percent in the mid-2000’s and up to 27 percent in the 2010’s. Proceeds from the sale of a primary residence remained small for first-time buyers, but grew slightly over the years to four percent from 2003 to 2007 and back down to two percent in 2016.
For repeat buyers in 1997, 51 percent used savings for the downpayment and 52 percent used proceeds from the sale of a primary residence. In 2016, 53 percent used savings and 53 percent used the proceeds from the sale of a primary residence. Savings dipped to the mid-40 percentiles in the 2000’s for repeat buyers, getting as low as 40 percent in 2005 and 2006. In the 2010’s, it jumped up to the high-50th percentile hitting 59 percent in 2011 and 2012. Proceeds from the sale of a primary residence saw an inverse relationship over two decades, where is jumped up to the mid-60 percentiles in the 2000’s, reaching a high of 66 percent in 2005 as a source of the downpayment. In the 2010’s, it decreased to the low-40 percentiles for repeat buyers hitting 40 percent in 2012.
To follow this series as we discuss the findings of 35 years of profile data, check out the hashtag #NARHBSat35 on your social channels. NAR Research will be releasing trend line data since 1981 to celebrate 35 years of home buyer and seller demographic research.
In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”
Properties stayed on the market for fewer days in October 2016 compared to one year ago amid strong demand and tight supply. Nationally, properties sold in October 2016 were typically on the market for 41 days (39 days in September 2016; 57 days in October 2015).
In many states, half of the properties that sold in August–October 2016 were on the market for less than 31 days. Local conditions vary, and the data is provided for REALTORS® who want to compare local markets against other states and the national summary.
Looking at changes in this value over the last few years, in most states the median length of time that properties stay on the market continues to fall amid tight inventory conditions.
Nationally, short sales were on the market for the longest time at 99 days, while foreclosed properties typically stayed on the market for 50 days. Non-distressed properties were typically on the market for only 39 days.
Nationally, 43 percent of properties were on the market for less than a month. Only nine percent of properties were on the market for six months or longer.
 Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.
 The data shown here are states with observations of at least 150 over the rolling three-month period.
 Days on market usually refers to the time period from listing date to contract date.
Either way you look at it, buyers know that commuting costs are high. Some buyers need to be closer to their job while others need to be closer to school districts. The National Association of REALTORS® released its 2016 Profile of Home Buyers and Sellers report to understand the trends of buyers and sellers. One trend we found fascinating that continued in 2016 was the importance of commuting costs. Twenty-nine percent of buyers found commuting costs as being very important to them, and another 39 percent said it was somewhat important to them.
We segmented this group further to learn the main factors that influence a buyer’s neighborhood choice. We found that 65 percent of this group choose a neighborhood as it was convenient to their job. Twenty-three percent of this group compromised on the price of the home. What is also interesting to note is that this group was also made up of 46 percent first-time home buyers, compared to the 35 percent of all buyers that purchased their first home this year.
Of this group, the median age was 38 years old; they bought homes with three bedrooms, two bathrooms, and were typically 1,800 square feet. The median income was $83,900 and the median home price purchased was $215,000.
So how does this compare to other buyers? We segmented married couples that had children under 18 living at home because it was similar in size as a subgroup, which comprised 31 percent of all buyers. Forty-two percent of this group cited that the distance to schools was the most important factor in selecting a neighborhood. Thirty-two percent (up from 27 percent) were first-time buyers, closer to the overall median, and these homes were typically larger with four bedrooms and two bathrooms at 2,200 square feet. The median age for this group was 37 years old; they bought homes with median income of $100,000 and the median home price purchased was $277,000 (up from $260,000 last year).
For unmarried couples, which comprise only eight percent of all buyers, 57 percent said that convenience to a job was the most influential factor when selecting a neighborhood.
The data also indicates that once families had kids, living closer to schools took priority over living closer to work. When segmented for children living at home, respondents reported that they actively compromised on the distance from their jobs more than any other group (16 percent with kids at home, compared to 14 percent of all buyers and 12 percent with no kids at home).
We are in a digital age and home buyers use the internet at various stages in their home search process. NAR data from the 2016 Profile of Home Buyers and Sellers shows that the first step in the buying process is to look online for properties—44 percent of buyers started here (up from 42 in 2015) and 13 percent of buyers looked online for information about the home buying process in the effort to educate themselves. Seventeen percent (up 14 percent last year) contacted a real estate agent right out of the gate.
In 2016, 51 percent of all buyers found the home they ultimately purchased on the internet and 34 percent found their home through a real estate agent. In comparison, in 2001, only eight percent of buyers found the home they purchased on the internet and 48 percent found their home through an agent. The use of the internet to find the home has increased over the years.
Buyers also indicated that finding the right property was the most difficult step in the home search process (52 percent), and more so for first-time buyers (56 percent). For all buyers, the paperwork (24 percent), understanding the process (17 percent), and saving for the downpayment (13 percent) were listed as difficult steps as well.
For buyers that looked online for properties, they also visited 10 homes over the course of 10 weeks before they purchased. For buyers that went straight to a real estate agent and did not look online, they visited four homes over only four weeks before they made their purchase, indicating that they likely know the neighborhood already where they want to buy.
As a result of using the internet to search for homes, buyers took the following actions: they walked through the home they viewed online (67 percent), saw exterior of homes and neighborhoods without walking through a home (44 percent), and found the agent used to search for or to buy a home (33 percent).
When it was time to finally close on a home, the majority of buyers work with a real estate agent. In fact, nine in 10 buyers signed with the help of an agent, which is the same as last year.
- NAR released a summary of pending home sales data showing that October’s pending home sales are up 0.1 percent from last month and also up 1.8 percent from a year ago.
- Pending sales are homes that have a signed contract to purchase on them but have yet to close. They tend to lead existing-home sales data by 1 to 2 months.
- All regions showed increases from a year ago, the Northeast led all regions with an increase of 3.9 percent. The West followed with an increase of 2.5 from a year ago. The Midwest had an increase of 1.2 and the South had the smallest incline of 0.8 percent.
- From last month, the Midwest had the largest increase at 1.6 percent. The West followed with a modest increase of 0.7 percent and the Northeast had an incline of 0.4 percent. The South had the only decline of 1.3 percent.
- The pending home sales index level was 110.0 for the US. This is the pending index’s 30th consecutive month over the 100 index level. September data was revised down to 109.9.
- The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.
- Existing home sales rose 2.0 percent in October from one month prior while new home sales decreased 1.9 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
- Specifically, 446,000 existing homes were sold in October while new home sales totaled 45,000. These raw counts represent an 8 percent decrease for existing home sales from one month prior while new home sales were unchanged. What was the trend in recent years? Sales from September to October decreased by 2 percent on average in the prior three years for existing homes and increased by 10 percent for new homes. So this year, existing homes outperformed to their recent normal while new home sales underperformed.
- Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate that have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
- What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, expect slower activity in November while activity will get busier in December. For example, in the past 3 years, November sales dropped by 15 percent to 21 percent from October while December sales increased by 7 to 24 percent from November. New home sales market tends to follow the same trend in the following two months. For example, in the past 3 years, raw home sales in November decreased by 8 to 18 percent from October while December sales typically rose by 6 to 13 percent from November.
The 2016 Profile of Home Buyers and Sellers survey is the second year we have collected data on the difficulty of saving for a down payment to buy a home and whether student loans were an impediment.
In years past, the down payment had been cited as one of the most problematic steps in the home buying process. In the 2016 report, the number grew slightly to 13 percent of buyers that had difficulty saving for the down payment and, of those, the number that reported student loan debt made saving the most strenuous step in the buying process jumped to 49 percent. For first-time buyers in the 2016 report, who are predominantly Millennials under the age of 34 years, 26 percent said saving for the down payment was the most arduous step in the process and, of those, 55 percent stated that student loan debt delayed them from buying a home.
For all buyers this year, a little more than a quarter (27 percent) reported having student loans with a median of $25,000 in debt. For first-time buyers, 40 percent cited still having student loans with a median amount of $26,000 in debt.
What’s more interesting is the amount of student loan debt that respondents cited around the country by subregion. The median student debt was the lowest at $20,000 in the Pacific states of Washington, Oregon, California, Alaska, and Hawaii, as well as the West South Central states of Texas, Oklahoma, Arkansas, and Louisiana. The median student loan debt was the highest at $40,000 in the East South Central states of Kentucky, Tennessee, Mississippi, and Alabama.
A majority of the regions reported student loan debt delaying buyers from purchasing a home. On the low end, debt delayed the South Atlantic and East South Central subregions for a median of two years. On the high end, debt delayed New England and Pacific states for a median of five years and the Mountain and West South Central subregions for a median of four years.
In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales: For single-family homes? For townhomes? For condominiums?” NAR compiles the responses for each property market into a REALTORS® Confidence Index.
The REALTORS® Confidence Index—Six-Month Outlook for single-family homes and townhomes registered above 50, indicating that more REALTORS® expected market conditions to be “strong” than “weak” over the next six months. The index for condominiums was at 50, above the 44 level registered at this time in 2015. The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016,” is expected to boost purchase activity in the condominium market. Among other measures, the law eases access to FHA condominium financing by reducing the FHA condo owner occupancy ratio from 50 percent to 35 percent, directing the FHA to streamline the condominium re-certification process, and providing more flexibility for mixed-use buildings.
In the single-family homes market, the outlook in the next six months is “moderate” in many states to “very strong” in the states of Washington and Rhode Island. In the townhomes and condominiums markets, the outlook is more mixed, ranging from “very weak” in West Virginia to “very strong “in the District of Columbia.
 Respondents were asked “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?” The responses for each type of property are compiled into an index. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.
The bill, which was championed by NAR, passed the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016 and was signed by President Obama on July 29, 2016. See http://www.realtor.org/articles/president-obama-signs-hr-3700
 The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A diffusion index greater than 50 means that more respondents rated conditions as “Strong” than “Weak.” For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 48 are labeled “Weak,” values greater than 48 to 52 are labeled “Moderate,” values greater than 52 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very strong.”
In 2016, first-time home buyers made up 35 percent of all home buyers, an increase over last year’s near all-time low of 32 percent where it had remained for the previous three years, according to The National Association of REALTORS® 2016 Profile of Home Buyers and Sellers report released in October 2016. From 2011 to 2016, the share of first-time buyers was well below the historical norm of 40 percent with buyers facing tight inventory as well as higher home prices and rent costs. In the South, it was as low as 31 percent and the highest in the Northeast region at 44 percent.
What’s more interesting is the fact that the percent of first-time home buyers varies largely across the country. In the Mountain region of Montana, Idaho, Wyoming, Nevada, Utah, Arizona, Colorado, and New Mexico, first-time home buyers were only 28 percent of the total number of buyers in 2016 (up from 21 percent in 2015), the lowest of any other region. They were also a low of 30 percent in the South Atlantic. The share of first-time home buyers was booming, on the other hand, at 45 percent in the Middle Atlantic states of New York, Pennsylvania, and New Jersey, as well as at 42 percent in the New England states of Vermont, New Hampshire, Maine, Massachusetts, Rhode Island, and Connecticut, similar to 2015.
Diving into the demographics of first-time home buyers, we see that over time the median age held steady at 31 years for five years in a row from 2011-2015. In 2016, the median age increased slightly to 32 years for first-time buyers. Buyers aged 18-34 years have comprised the largest share of first-time home buyers at roughly 50-60 percent in the last few years. In 2016, buyers aged 25-34 years accounted for 56 percent of first-time home buyers, compared to 50 percent ten years earlier in 2005. By way of comparison, repeat buyers were almost spread evenly around 20 percent in most age groups except Millennials (accounting for only 12 percent in 2016) and those over 75 years old.
The share of first-time home buyers grew for both buyers aged 35-44 years and aged 45-54 years. Buyers aged 35-44 years accounted for more of the first-time buyers’ share this year at 21 percent, up from 19 percent in 2015. Similarly, buyers aged 45-54 years also accounted for more first-time buyers this year at 10 percent, up from eight percent in 2015.
Buyer demographics also saw huge differences between household compositions for first-time buyers. Of the unmarried couples that bought a home last year, 60 percent (up from 57 percent in 2015) were first-time home buyers. In comparison, of the married couples that purchased a home, 32 percent were first-time buyers in 2016 (up from 27 percent in the previous year). Of the single males and single females that bought a home, 37 and 36 percent respectively (both down from 39 percent in 2015) were first-time home buyers.