Every month, NAR releases a market intelligence report called the REALTORS® Confidence Index. The REALTORS® Confidence Index (RCI) survey gathers on-the-ground information from REALTORS® based on their real estate transactions during the month. This report presents key results about these market transactions.
Gay Cororaton, Senior Economist, Director of Housing and Commercial Research, is the lead author of the report. In this conversational Q&A, she provides insights into the data, perspectives on how members can use the report, and the results she found to be most interesting.
How did this report come about?
Gay Cororaton: The REALTORS® Confidence Index (RCI) report first came out in January 2008 at the onset of the Great Recession that lasted from December 2007 — June 2009. The intention of the survey was to enable NAR to track the housing market's trajectory of collapse and recovery at the local level and synthesize the information to assess the general direction of the housing market. The Great Recession was a time of great uncertainty and anxiety for homeowners and REALTORS®, so collecting valuable on-the-ground information from our members was imperative.
What questions is this report trying to answer?
Gay Cororaton: The RCI report is seeking to answer the fundamental question: where is the housing market heading and what forces are driving demand? The survey collects information on important market indicators such as buyer and seller traffic; price movement; days on market; cash sales; the shares of first-time, investor, vacation home, or international buyers; and other information about the transaction such as number of offers, issues affecting contract closing, and contract contingencies buyers are waiving.
Because this report collects the results of a monthly survey that is randomly sent to 50,000 REALTORS®, the RCI survey is also the best vehicle to gather feedback from REALTORS® about the "issue of the month" or emerging trends on the market. In the past, we've asked about issues such as the effect of mortgage disclosure regulations on closing time (answer: only 18% said closing time took longer), the lock-in effect of low interest rates on willingness to move (answer: 15% of clients decided not to sell), and transactions that are in a flood zone (answer: about 10%).
What important trend(s) does this report capture?
Gay Cororaton: Currently, the RCI survey is revealing how intensely competitive the housing market is and all the ways that buyers are attempting to outbid other offers. As of April 2021, the median days on market has fallen to a record low of 17 days since the RCI survey started gathered this information in May 2011. This is compared to 27 days one year ago. On average, there are 5 to 6 offers for every home sold compared to 2 to 3 offers one year ago. The REALTORS® Buyer Traffic Index is at its highest level at 80 while the REALTORS® Seller Traffic Index is at 40 (an index below 50 means conditions are "weaker" rather than "stronger" compared to one year ago). With not enough supply, the share of cash buyers has surged to 25% of purchases, compared to just 15% one year ago. The RCI survey also reveals that 25% of buyers waived their inspection contingency. Among clients who did not make an offer, 31% did not make an offer because they simply "did not want to compete" with other buyers. So buyer fatigue is starting to set in, although with mortgage rates hovering in the 3% range and expected to increase, demand is still very strong.
The RCI survey is also revealing the preference for housing in the suburbs compared to the city, and this preference is really a combination of many factors: housing is less expensive in the suburbs, there's more open space in the suburbs and who knows if we get hit by another pandemic that may require social distancing again, the ability to work from home makes traveling more bearable on the fewer days one has to go to the office, and millennials are starting to have families. The RCI survey shows a rising share of buyers in the suburban/rural/small town area, to 85% in 2021, up from about 80% in 2019.
What trends have changed the most dramatically since the report's inception?
Gay Cororaton: One important trend that the RCI survey is capturing is the low level of distressed sales, which make up about 1% of sales. During 2008 through 2011, distressed sales accounted for 20% to 30% of existing-home sales. Despite the initial loss of 20 million jobs at the outset of the pandemic, and with 7.6 million jobs still to be recovered as of May, there have not been foreclosure sales because of the forbearance of lenders and income support for the unemployed through the regular state unemployment insurance program and the Pandemic Unemployment Assistance (PUA) for workers not covered by the state insurance programs, such as for part-time workers and the self-employed. So housing prices have not fallen and the median existing-home sales price is up 19% year-over-year.
Some are concerned that once the forbearance period ends, house prices could start falling, but I don't see this happening because most homeowners who are in forbearance work out payment arrangements with their lenders. Less than 10% of those that exited forbearance sold their homes. Currently, 2.1 million are in forbearance, which is equivalent to about 200,000 homes, just 3.4% of the existing-home sales market (5.85 million as of April), so the higher supply won't lead to a big cut in prices and those homes will add to the supply of homes on the market.
What aspects of this report do you find most interesting?
Gay Cororaton: I think the most interesting aspect of the report is how it provides insights into market conditions and characteristics of market transactions and what the mood of buyers is out there. Who could better provide information than REALTORS® who are in the thick of the market? We have about 1,500 to 2,000 respondents every month who provide us quantitative data and also qualitative information through their comments. I enjoy reading their comments and I have used those to improve the survey and as a starting point for research.
To our wonderful REALTORS® reading this, thank you so much for taking the time to participate in the survey.
How can our members use this data?
Gay Cororaton: Understandably, they have the best information on what's happening locally in their markets, but the RCI report gives them data on what's happening across all markets. They can use the data in their communication with clients to convey knowledge, experience, and a broad understanding of market conditions so they can advise their clients with confidence.
The RCI will be updated on June 22, 2021. For the latest data, check the REALTORS® Confidence Index report page.