I am generally skeptical of most opinion surveys. There are far too many surveyors asking us about our opinions on anything and everything and then treating the results as factual. Just because 70 percent of us have a favorable opinion about something doesn’t make it right. Many great leaders ran afoul of public opinion. Jesus Christ, in his day, was certainly in the minority when it came to approval ratings. Opinion surveys have acquired so much credibility they often shape public policy.
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Every organization must have a full-time surveying staff producing unnecessary and redundant results. The Building Industry Association surveys their members monthly. Should we be surprised each month to discover builders are feeling pretty lousy about things? The Consumer Confidence Survey reminds us weekly that consumer confidence is at low levels and the latest economic survey shows 75 percent of Americans think our country is on the wrong track. How many surveys does it take to tell us what we already know?
Some surveys I find interesting but I’m not sure what to do with the information. An example is the most recent survey by the National Association of Realtors. NAR released their findings from surveying 81,000 homebuyers and sellers who purchased a home between July of 2010 and June of 2011.
Here are some highlights:
Despite low home prices and interest rates, buyers are staying well under the maximum priced home they could afford. This is a structural change in buyer’s attitude. An old adage in real estate used to be, “Buy a little more house than you can afford.” The thinking was that the payment would remain the same while a buyer’s income and family grew. That’s changed to “less is more.” Another change is that buyers are making larger down payments. The medium down payment is now 11 percent. That’s up a full percentage point from last year and 5 points above 2006.
The number of first-time buyers fell to 37 percent nationally and 34 percent in California. That’s down from 50 percent and 45 percent in the previous survey. Typically, first-timers would make up 40 percent of all sales. They are critical to a healthy housing market because they buy existing homes, enabling those sellers to trade up. Entry level buyers are finding increasing difficulty in qualifying for their first loan from tight-fisted lenders.
Paul Bishop, NAR vice president of research, points the finger at the banks tight credit policies. “Banks simply needs to get back into the business of lending.”
The typical first-time buyer was 31 years old with a median income of $62,400. They purchased a three-bedroom home with 1,570 square feet, costing $155,000, using a FHA loan (54 percent) or VA loan (6 percent). First-time buyers utilized a variety of sources for their down payment, including personal savings (79 percent), gifts from relatives and friends (26 percent), sold stocks or bonds (9 percent) borrowed against their 401 (k) fund (8 percent) and a personal loan from a friend or relative (7 percent). Ninety-four percent of entry-level buyers chose a 30-year fixed rate mortgage.
The typical repeat buyer was 53 years old, earned $96,600 and purchased homes with 2,100 square feet costing $219,500.
Buyers searched an average of 12 weeks and visited 12 homes prior to their purchase decision. Single-family detached homes accounted for 77 percent of all purchases and 51 percent of them were in a suburb or subdivision, 18 percent in an urban area, 18 percent in a small town, 11 percent in a rural area and 3 percent in a resort or recreation community. The median distance from the previous residence was 12 miles. A majority of buyers considering purchasing an REO but didn’t buy one for a variety of reasons: Couldn’t find the right house (29 percent) poor condition (15 percent) and a difficult process (15 percent).
The typical seller was 53 years old with an income of $101,500 who moved a median distance of 20 miles from their home where they had lived the last nine years. Forty-six percent moved into a larger home, 31 percent bought a comparable size home and 23 percent downsized. The typical seller who had purchased their home nine years earlier realized a gain of $26,000. Twenty-two percent of California home sellers lost money from the sale of their home.
Eighty-nine percent of survey respondents used a real estate agent for their sale or purchase while 7 percent purchased directly from the builder and 4 percent directly through the previous owner. Both buyers and seller most likely selected their agent based upon a referral from a friend or relative, with trustworthiness and reputation being the most important factor. Eighty-nine percent said they were likely to use the same agent again or recommend them to others.
While 78 percent of recent homebuyers said their home is a good investment, only 38 percent of California sellers said they planned to purchase another home. That’s actually an improvement from only 30 percent in the 2010 survey but substantially down from the 70 percent in 2005 that said they would be buying another home.
One-third of all California sellers said the reason they sold their home was because they were financially distressed. That number was up slightly from 2010. Let’s hope that survey number declines by this time next year.