The National Association of Realtors’ latest Profile of Home Buyers and Sellers for 2011 has some surprising statistics in terms of who is buying and selling in today’s market. With the end of the first-time homebuyer tax credits, baby boomers have replaced Gen Yers and Gen Xers as the dominant players in today’s real estate market.
There were a number of very surprising statistics in this year’s profile. Here are some of the key trends, many of which have important ramifications in terms of where to focus your efforts in 2012.
1. Have we finally hit bottom?
A great piece of news in this year’s profile is that prices appear to be stabilizing in some areas. This is the first step in climbing out of the rocky bottom we have been in for the last several years.
While it’s granted that all real estate is local, the national numbers are encouraging: "While sales declined, home values appear to have found more solid footing, with several measures of prices showing little change compared to the year before."
2. Boomers move to the forefront
In 2010, due to the first-time homebuyer tax credit, the median age of first-time buyers dropped to 31. In many markets, the number of first-time buyers hovered at the 50 percent level. The smart move in 2011 was to market to Generation Y — generally known as the demographic following Generation X and having birth dates ranging from the late 1970s to the early 1990s.
Over the last 12 months, however, there has been a substantial change that can have important ramifications for your business in 2012. In 2011, baby boomer purchases substantially surpassed the number of Generation Y buyer purchases (38 percent of sales to boomers versus 31 percent of sales to Gen Yers).
This is surprising on two fronts: First, there are more Gen Yers than there are boomers. Second, Generation Y is at its peak buying age (i.e., late 20s and early 30s) — the period when they are marrying, establishing new households, and having children.
Furthermore, boomers are actively driving the second-home market. Research shows that the peak time to purchase a second home is between 50-60. The biggest part of the baby boom occurred in 1960 (now in their early 50s). In 2010, only 14 percent of the sales were second homes vs. 19 percent (a 33 percent increase) in 2011.
As a result, it may be smart to revisit your business plan for 2012 and to place more emphasis on working with boomers who are currently the dominant players in terms of purchasing.
3. FSBO successes continue to decline
In 2002, 24 percent of all sales were conducted without the assistance of a Realtor. After hovering in the 12-14 percent range for the last few years, the share of for-sale-by-owner sales reportedly shrank to an estimated 10 percent. Of those FSBO sellers, 40 percent knew the person to whom they sold their home.
Putting it a little bit differently, 60 percent of the sellers who chose to sell their home by owner were successful in selling their home to someone they did not know.
Part of the reason may be due to the results that Realtors produce as opposed to those who are selling by owner. The profile reports: "The typical FSBO home sold for $150,000, compared to $215,000 among agent-assisted home sales."
4. More buyers are using agents as well
Along the same lines, 89 percent of buyers purchased their home through a real estate agent or broker — that’s up from 69 percent in 2001. There are probably three reasons for this trend:
- First, Realtors shorten the search process when there are huge amounts of inventory on the market and people are pressed for time.
- Second, the increased regulatory environment makes it harder for buyers to navigate their way through the sales process.
- The most important reason, however, is probably related to the difficulty of the loan process both on the buyer’s side in terms of qualifying for a loan, and on the seller’s side based upon the appraisal process.
5. More cash buyers
While the news is filled with stories about people who put little or nothing down on their homes, 13 percent of all sales in this year’s profile were to cash buyers. While only 5 percent of the first-time buyers paid cash, a whopping 18 percent of repeat buyers didn’t require a loan.
6. More married couples
The trend since 2001 has been a substantial decline in the share of buyers who were married. From 2001-2008, the number of married couples purchasing homes dropped from 68 percent to 58 percent.
This is probably due to the fact that a historically high percentage of Gen Xers (those born from 1965-1977) are unmarried. As a result, we had a huge proportion of single female buyers. This was a smart market niche for 2011.
In 2012, it’s an entirely different story. The number of single female buyers is still relatively high at 18 percent, but that’s the lowest number since 2004 and represents a reversal of a major trend.
In 2011, the profile reported the largest share of married buyers since 2001: 64 percent. Consequently, it’s probably smart to focus on marketing that reaches couples and families in 2012.
7. Life changes drive real estate sales
While the desire to own a home continues to be the major motivator behind home sales, there has been a substantial shift among repeat homebuyers.
According to the profile: "The primary reason to purchase a home among repeat buyers is often because of life changes: the desire for a larger home, a job relocation or move, desire to be closer to family and friends, or a change in a family situation."
If you want to create more sales in your real estate business in 2012, focusing on the seven areas outlined above is a great way to achieve that goal.