A snapshot of recent American home sellers

By Sabrina Karl

We conclude our multi-part series on the National Association of REALTORS’ extensive statistical profile of 12 months’ worth of U.S. home purchases with a look at the seller’s side of the equation.

Predictably, the typical home seller during the study’s 2018-2019 year-long period was older and more affluent than home buyers during the same 12 months. The median seller’s age was 57, while the typical buyer was in their mid to late 40s. Sellers also had a median income about $10,000 higher than the average buyer’s income (about $103,000 vs. $93,000, respectively).

Sellers typically lived in their home for 10 years before selling, with the top three reasons for the move being a desire to live closer to family and friends (16 percent), the need for a larger house (13 percent), and job relocations (11 percent).

Sellers netted final sales prices that averaged 99 percent of the seller’s final listing price, and at a median increase over the original purchase price of $60,000. The typical time on the market was three weeks.

Almost 9 in 10 sellers (89 percent) worked with a real estate agent to sell their home, while 8 percent were FSBO sales. The FSBO share continues to sit at its lowest level since the NAR began reporting this data in 1981.

Two-thirds of sellers found their agent through a referral from someone they know, or worked with an agent they’d used before. Three-quarters said they only contacted one agent before making a choice.

Seventy-five percent of sellers said they paid their agent’s compensation, and about a third (34 percent) indicated they offered buyer incentives.

The REALTORS’ annual survey was conducted in July 2019, capturing over 5,800 home sales between July 2018 and June 2019. Results were then weighted to represent U.S. population demographics.

How Americans are paying for their new homes

By Sabrina Karl

Each year, the National Association of REALTORS publishes a profile of statistics on home purchases during the past year. In our previous installments here, we’ve dug into who bought the homes, the types of homes they purchased, and how they navigated the buying process. Now, in Part 4, we take a look at the NAR’s findings on how Americans financed their home purchases.

Financing is far and away Americans’ leading method for affording the purchase of a new home. Among all buyers during the 2018-2019 twelve-month period, 86 percent opted to finance their purchase with a mortgage.

Among first-time buyers, the amount they financed averaged 94 percent of the home’s value, while repeat buyers financed just 84 percent on average. Across all buyers, the typical loan-to-value ratio was 88 percent.

For about 1 in 8 buyers (13 percent), the most difficult step in the home-buying process was saving up a sufficient down payment. Sixty percent indicated their down payment source was personal savings, while the next most common source was proceeds from the sale of a primary residence, which 38 percent reported as funding their down payment.

For buyers who indicated saving for a down payment was difficult, more than half (51 percent) said that student loan obligations were their biggest financial obstacle. In second rank, 45 percent cited credit card debt. Auto loan payments were reported to make saving for a down payment difficult by 38 percent of this year’s home buyers.

Still, Americans find it worth it, with 81 percent saying they view purchasing a home as a good financial investment.

The REALTORS’ annual survey was conducted in July 2019, capturing homebuyers who purchased between July 2018 and June 2019. Responses were received from over 5,800 buyers, with results weighted to represent U.S. population demographics.

How Americans are buying their homes

By Sabrina Karl

We continue our look at the extensive data presented by the National Association of REALTORS in their annual profile of U.S. home purchases with a deep dive into how Americans are navigating and completing the home buying process.

What has changed greatly over the last 20 or more years is how prominently the internet has factored in Americans’ home-hunting process. In NAR’s latest snapshot of annual data, about 1 in 6 prospective homebuyers (16%) began their search by contacting a real estate agent.

Compare that to 44 percent whose first step was to look for properties online.

Interestingly, those who used the internet in their home search shopped for an average of 10 weeks and visited an average of 10 homes, while those who did not use the internet spent four weeks searching on average, and visited just four homes.

Regardless of their start and how much supplementary legwork they did via the internet, the vast majority of homebuyers (89%) did ultimately buy their home through a real estate agent or broker.

When deciding to hire an agent, the top reason was a desire for the agent to help them find the right home (cited by 52% of buyers). About 4 in 10 used an agent that was referred to them by someone they knew, while 12% returned to an agent they had previously used. Three-quarters (75%) interviewed only one agent during their search.

In the end, 87% of recent buyers reported that their agent was a very useful information source in the process, with slightly more (93%) saying the internet was very useful.

The REALTORS’ annual survey was conducted in July 2019, capturing homebuyers who purchased between July 2018 and June 2019. Responses were received from over 5,800 buyers, with results weighted to represent U.S. population demographics.

A snapshot of the homes Americans are buying

By Sabrina Karl

In Part 2 of our look at the National Association of REALTORS’ annual profile of statistics on recent home purchases, we dive into the kinds of homes Americans bought, how far they moved, and what priorities led them to choose the home they did.

Far and away, the most commonly purchased home type in the U.S. is a detached single-family residence. These homes accounted for 83 percent of the purchases during the year. In a distant second, townhomes and row houses represented 6 percent.

The make-up for senior-related housing purchases is quite different, however. Senior buyers accounted for 12 percent of all home sales during the year, with 20 percent of their purchases being condos.

Purchase prices increased slightly this year, to a median closing price of $257,000, and a typical sale at 98 percent of the seller’s asking price.

For that price, the typical home purchased was 1,850 square feet with three bedrooms and two bathrooms, and a median year of construction of 1990.

The study also found that most buyers are not moving far, with the median distance between the purchased and original homes being a mere 15 miles.

Seven out of eight homebuyers (87%) went with a previously owned home, with the number one reason being a belief that these homes offer a better overall value for the money (reported by 33 percent of these buyers).

Meanwhile, for the 13% of buyers who purchased a newly built home, they were most commonly driven by a desire to avoid renovations and problems with plumbing or electricity (reported by 39 percent).

The REALTORS’ annual survey was conducted in July 2019, capturing home purchases between July 2018 and June 2019. Responses were received from over 5,800 buyers, with results weighted to represent U.S. population demographics.

The No.1 reason for mortgage application denials

By Sabrina Karl

In 2018, new rules required mortgage lenders to report the denial reason for each application they rejected, and the Consumer Financial Protection Bureau recently reported the results collected from more than 5,600 banks, savings associations, credit unions and mortgage companies.

Across all 2018 mortgage applications for 1- to 4-unit residences — including purchases, refinancings, and improvement loans — the overall denial rate was about a quarter, or 2.65 million rejections out of 10.7 million applications (24.7%).

But the denial rate varied widely by application type. New purchases had the lowest rejection rate, at just 14.6%, while refinance applications were about double that (28.1% denied for non-cash refinancings and 29.8% denied for cash-out requests). In contrast, more than 4 in 10 home improvement loan applications were rejected (42.9%).

Across all applications, the top reason lenders denied an application was due to the applicant having a higher than desired debt burden, as measured by the debt-to-income (DTI) ratio. This accounted for about a third of the rejections across application types (36.8% for home purchases, 34.3% for refinancings without cash, and 31.9% for cash-out applications).

For all mortgage types except home improvement loans, the top three rejection reasons were an excessive DTI, problems with the applicant’s credit history, and quality of the collateral (property) securing the loan.

Only for home improvement loans did the ranking differ. Here, credit history was the top reason for a rejection, accounting for almost half (46.7%) of the denials. More than 70% of improvement loan applications were reported to be second liens, which helps explain lenders’ added caution in approving the request.

The DTI threshold recommended by the CFPB for qualified mortgages is 43%. In 2018, more than half of the denied home purchase applications (53.1%) had a DTI above this level.