Everything has changed in real estate since the pandemic—or has it?
Looking at the latest of the National Association of REALTORS® (NAR) long-running “Generational Trends” annual surveys of homebuyers and sellers—the first that includes only data from the pandemic—it remains unclear just how quickly and deeply real estate has evolved, and to what degree consumer behavior or preferences were altered, as the survey reflected some known truths about the market, while providing counterpoints to other perceptions.
One thing that hasn’t changed: people, especially the rising generation of millennials (who now make up 34% of all buyers) still report needing and trusting real estate agents, with 92% of younger buyers saying they used an agent.
“Young buyers, it’s hard to enter this market. They’re doing so on lower household incomes, there’s a lot of competition in that affordable part of the market,” says NAR Vice President of Demographics and Behavioral Insights, Dr. Jessica Lautz. “So they’re using their agent to help negotiate as well.”
The comprehensive survey, which covers everything from consumer demographics to specific preferences as far as homes and agents, found evidence to support some of the changes that have been widely discussed in the media—buyers paying over asking price and sellers selling homes almost immediately—while finding minimal or inconclusive evidence for other expected changes.
Notably, the number of buyers who reported paying over asking price nearly doubled, from 15% in last year’s survey to 29% this year. The majority of those paid between 101% and 110% of asking. 27% of buyers reported compromising on their price, and also reported compromising more often on nearly every other aspect of a home, from neighborhood to size.
On the seller’s side, the median length of time a home was on the market was one week, with 17% of homes selling in less than that. A significant majority—62% of homes—sold in two weeks or less, compared to 46% pre-pandemic.
This is one area of the report, Lautz says, that fully affirms what most in the industry already knew—tight inventory and ballooning demand had buyers fighting for homes, especially at an entry level price.
“It is very hard to find an overlooked area or home that is coming at an affordable price at this point,” she says.
But another, related narrative—that buyers are spending months hopelessly searching and failing to find a home—is not necessarily backed up by the data. The length of search was roughly the same compared to pre-pandemic at eight weeks, as was the number of homes viewed (nine pre-pandemic and eight during the pandemic).
Lautz hypothesizes this might be partially explained by the lack of inventory.
“You can’t see what’s not for sale—you can’t see a lot of homes if there are not a lot of homes in a particular price point,” she says.
She notes that older millennials (ages 32-41) and older boomers (67-75) both averaged slightly longer time periods for their home search, and guesses that higher incomes among those demographics might have given them a larger segment of homes to consider.
A Cloudy Future
Besides the hyper seller’s market, maybe the next most talked about change in the last year or so was the alleged decreased importance of location, as many workers were able to eliminate the need to live commuting distance to a job.
The jury is still out on this, according to Lautz, with really not enough time or data to determine how extensive or permanent the labor shift will be, and therefore how much housing preference will evolve.
“I think we’re kind of just at the beginning, with the remote work trend,” she says. “Is it remote, is it a hybrid setting, is it back five days a week in the office—you may not 100% have known in the last year.”
A few data points support the notion that people are less concerned about being close to work. 3% fewer buyers reported “convenience to job” as an important factor in neighborhood choice compared to pre-pandemic, with 42% still saying it was very important to live close to work. The number of buyers who said their home purchase was job related also dropped slightly, from 7% to 5%.
On the other hand, other responses indicated the opposite—that jobs still were a consideration in home choice. Younger buyers (22-41) were actually more likely to say that a career or job change could inspire a future move. The median distance moved also stayed flat through the pandemic at 15 miles, with younger buyers moving even shorter distances, and there was no change in the types of areas that people were purchasing homes (urban, suburban, rural, etc.) compared to pre-pandemic.
Lautz says that it will likely depend on big companies and labor conditions, but that the next couple years could be more revealing as to whether this is a real, significant trend.
Demand and consumer confidence has also remained a talking point, with many worried that affordability and a lack of inventory might eventually discourage potential homebuyers from even trying to find a home. There was a modicum of evidence in the survey to indicate this might indeed be happening, with 5% less respondents saying “it was just the right time” for a home purchase compared to pre-pandemic, and a decrease of 3% in those saying that it was “the best time because of availability.”
Overall satisfaction in the buying process also fell, particularly among the youngest buyers, with only 56% of 23-31 year-olds “very satisfied” compared to 63% pre-pandemic.
Lautz says that a lot of younger people are living with parents and not paying while they save for a house (more than 24% used this strategy), and are making other sacrifices to save when they want to purchase a home. The student loan pause has also helped a large number save and ultimately purchase a home, Lautz adds.
A few other trends—the number of cash buyers, for instance—were not captured or were only partially included in the survey because the report focused on primary residences rather than second homes or investment properties, according to Lautz.
Overall, affordability remains a huge concern across the board, especially as rates rise, Lautz says. Gen X buyers are moving into multi-generational homes with parents and relatives, at least partially due affordability, and Black and Hispanic buyers have less access to intergenerational wealth and capital, meaning they are unable to reach the threshold of homeownership until much later in their lives.
“You have to be a wealthier buyer in order to compete in this market,” she says. “Or you have down payment assistance.”
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas, firstname.lastname@example.org.