NAR recently held its 2022 Real Estate Forecast Summit. BAM broke down the 2022-2023 housing market forecast from Dr. Lawrence Yun, NAR Chief Economist. Today, we’re diving into consumer behavior and market opportunities.
NAR’s Forecast Summit intends to cut through the misinformation rife on both Instagram and TikTok. Many videos on these platforms present deeply flawed messages on the housing market—with real costs to the consumer.
Dr. Jessica Lautz, NAR Vice President of Demographics and Behavioral Insights, broke down what’s actually happening in the market, all based on data, not trending TikToks.
Shifts in Consumer Behavior
Dr. Lautz reviewed the following trends in consumer behavior over recent years.
- Homes moved very quickly in June—with median days on market dropping from 101 in May 2011 to 14 in June 2022.
- Buyers with lower locked-in rates are motivated to buy—those locked-down rates have a limited window, and buyers are keen to take advantage.
- Many buyers without those lower rates can no longer afford to buy a home—due to higher mortgage rates or the inability to make the down payment
- 88% of homes sold in under a month—up from 24% in May 2011.
- Average number of offers received is down to 3.4 from 5.5 in early days of the pandemic.
- One-third of buyers are waiving contingencies—inspection & appraisal: 30% & 32%
- Non-primary residence buyers are down to 16% from a 22% high (early pandemic).
- First-time buyers still suppressed—down to 30% from 53% in 2015 (40% would be a solid historical share).
- Share of distressed sales (foreclosures/short sales) has decreased to 1% from a high of 49% in 2008.
Five Market Opportunities
Looking at the housing market today, there are five distinct opportunities for home buyers and sellers.
#1. More buyers are making purchases based on virtual tours
More homebuyers are making purchases based on virtual home tours. They’re not physically going into that home; real estate agents are doing the legwork and conducting virtual tours and showings for their clients.
The percentage of homebuyers going this route is up to 12%, up from 4% at the beginning of the pandemic in April, 2020.
Low inventory is still an issue. But migration trends are a major factor behind this increase in virtual home purchases.
People moving a long distance away can’t hop a flight whenever they want to attend an open house or in-person tour. So, they call up their real estate agent and ask for a virtual tour.
Key takeaway: Brush up on your video skills and make virtual tours a regular part of your services.
#2. Remote work is still happening—and is likely to continue
Another key trend is the increase in remote work, particularly in some industries, which is why 34% of homebuyers are looking for work-from-home features. And 85% are purchasing homes outside city centers. Because why deal with insane traffic and city noise if you don’t have to?
Key takeaway: Include work-from-home features in your listings to attract the attention of homebuyers working remotely.
#3. Homebuyers priced out of the market
Many homebuyers have found themselves priced out of the housing market because they cannot afford the down payment. That’s in addition to homebuyers who’ve hit the pause button due to higher mortgage rates and ramped-up mortgage payments.
NAR sees a lot of overlooked offers for homebuyers with FHA loans, VA loans, or USDA loans. This is due to steep competition from offers without financing.
Half of NAR members have worked with a client knocked out of the running because they couldn’t scrape together enough for a competitive down payment.
Misinformation plays a considerable role in this. According to a NAR survey, 35% of homebuyers think the typical down payment for a home is 16% to 20%. Ten percent of them think it’s more than 20%.
Typical down payments for first-time homebuyers is actually 6% to 7%. For repeat buyers, it’s around 17%.
With the average number of offers per home decreasing, homebuyers are in a stronger position to get their contracts ratified. More homebuyers are also taking advantage of low down payment programs, and agents should be aware of those.
Key takeaway: Collect and provide the data your clients need to understand exactly what they should expect to pay for a down payment and other costs involved. And for those at an economic disadvantage, help them access financial resources to help with those costs.
#4. Buyers want to see energy efficiency in home listings
Buyers want to cut energy costs where they can. And with climate change driving up the heat in summer and intensifying the cold in winter, more buyers want to see evidence of energy-efficient AC and heating systems in home listings.
Key takeaway: Talk to sellers about any remodeling they’ve done to their homes so you can promote any energy-efficient upgrades in your listings.
#5. Buyer behavior doesn’t necessarily reflect buyer wants
Unfortunately, while homebuyers do want homes with energy-efficient features, the data shows them still opting for cheaper, older houses.
So, while energy efficiency is important to 7 out of 10 buyers, the typical home purchase is around 29 years old.
Unless the previous owners have made extensive updates, those homes do not come with energy-efficient heating and cooling systems, appliances, windows and doors, or insulation.
Even with the growing interest in energy-efficient homes, one out of five Millennials and Gen X-ers compromise on the home’s condition to save money on their home purchase.
Given this trend, real estate agents should be talking to sellers about cost recovery for specific remodeling projects. You can also refer them to trusted contractors to help them save money and get the best results.
Key takeaways: Show sellers the cost advantage of making energy-efficient upgrades. And show buyers the long-term benefits (to their wallets and their health) of paying more up-front for energy-efficient features.
Homebuyers and sellers rely on real estate agents to know all about the housing market and to help them make sense of the landscape. What are you doing to cut through the noise and help your clients make the most of these trends?