This week’s release of the National Association of Realtors® Annual Profile of Home Buyers and Sellers marks the 35th year of NAR’s analysis and description of home buyer and seller behaviors and attitudes. You may not remember what it was like in 1981, but the country was coming out of a deep recession. The economy was still scarred with double-digit unemployment, inflation and interest rates. The 35th issue makes us think about home buying changes over the years.
According to the US Census Bureau (census.gov), the median price for a new home in 1981 was $68,900, while in 2010 the average new home price was $221,800. Freddie Mac’s (freddiemac.com) data indicates that the average mortgage interest rate in 1981 was 16.63 percent, and 4.69 percent in 2010. Surprisingly, the cost of housing (when financing 100 percent of the sale price) has only increased about 17.5 percent from 1981 to 2010!
People want their space and privacy. According to the American Enterprise Institute (aei.org), the median square feet per person in a home in 1981 was about 550sf, while in 2014 it was 987sf. This expansion in personal space was expressed in the home size. The median size of a home in 1981 1,550sf, while 2010 it was 2,169sf (according to the Census Bureau). Also consider that the typical home of 1981 only had one and a half bathrooms, and the expectation today is that a home should have at least two and a half bathrooms.
An October 18th news release from the NAR (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) provided some insight into how the housing market has changed through the years. One noticeable factor is the reduced number of first time home buyers entering the market due to underemployment, student debt, lack of down payment, or delaying family formation. Last year’s percentage of first time home buyers dropped the lowest rate since 1987; and “according to the U.S. Census Bureau, the homeownership rate for 18-35 year-olds is currently at 34.1 percent, the lowest level in records dating back to 1994.”
It’s becoming apparent that real estate agents are not being replaced by the internet. Although a majority of home buyers use the internet to assist them with the home buying process, the NAR reported that 90 percent of home buyers and sellers surveyed for this year’s profile worked with a real estate agent. As a result, for-sale-by-owner transactions were at the lowest level ever (FSBO transactions peaked during 2003-2004).
The home buying process now takes longer than it used to. Putting aside recent changes to the mortgage process, the 2016 Home Buyer and Seller Profile brings attention to the amount of time a home buyer needs to find a home. According to the NAR, the average time to find a home was relatively unchanged from the 1980’s to about 2007; which about seven to eight weeks. The duration of the home search peaked at twelve weeks from 2009 to 2013. However, since then the average time needed to find a home is about ten weeks. The increased search time is due to a number of factors. Brisk sales combined with periods of low inventory has not provided home buyers with much of a choice from which to select. Not to mention an unprecedented amount of available information that has created a savvy home buyer.
Copyright © Dan Krell
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