AAR Breaks Down NAR's Most Recent Buyer Profile Data
November 24, 2020
If you think 2020 was a challenge for REALTORS®, you’re right, but it was also a tremendous opportunity as the pandemic caused many Americans to take a close look at their current home and decide whether it met their needs. Home buyers and sellers in 2020 worked with real estate professionals in record numbers, according to an annual survey conducted by the National Association of REALTORS®. Only eight percent of recent home sales were For-Sale-by-Owner (FSBO) this year, which is the lowest share reported since NAR began its annual survey in 1981. Those homes typically sold faster than agent-assisted sales – often because homes were sold to someone the seller knows– but for significantly less at a median price of $217,900 compared with $242,300 for agent-assisted homes.
The National Association of REALTORS® 2020 Profile of Home Buyers and Sellers is a survey of homebuyers who purchased a primary residence between July 2019 through June 2020. The survey contained 131 questions on topics ranging from the buying and selling experience to financing home purchases and includes demographics on buyers and sellers. This year’s survey also offered contrasts between homebuyers and sellers before and during the COVID-19 crisis.
Home Buying and Selling During a Pandemic
COVID-19 had an impact on nearly every facet of the buying and selling experience, according to the report. “Buyers who purchased during the onset of COVID-19 were more likely to have higher household incomes, purchase at a higher price point and more likely to purchase a multi-generational home.” An increased number of buyers were seeking suburban homes (57 percent) or small-town homes (23 percent). Before April, sellers cited a desire to be closer to friends and family as their primary reason for selling. After April, sellers were looking for larger homes and became more urgent to sell. Technology became a more valuable marketing tool after March with 27 percent using virtual tours compared to 16 percent before March and an all-time high of 97 percent using the internet to search for a home.
On a bright note for sellers, the survey found that the pandemic provided a boost in the average sales price – $300,000 for those selling after March compared to $270,700 for those who sold before that time. Furthermore, nearly a quarter of buyers who purchased after March paid $500,000 or more for their new home. That assessment is consistent with Huntsville broker Kathy Mann’s experience. Her clients at CK Mann Realty were "often looking for their dream home," said Mann.
“My clients, many who were nearing retirement age, were not looking to downsize. Instead, they wanted larger homes and communities with amenities like outdoor space, walking trails and swimming pools.” Many were looking for at least four bedrooms and two baths in move-in ready homes, according to Mann. “With inventory low, we try to prepare clients for the market where they may have to compromise by taking on a kitchen renovation.”
2020 Home Buyer and Home Characteristics
A married couple in their mid-40s with a household income of $96,500 is a snapshot of the typical 2020 homebuyer.
- Married couples represented 62 percent of buyers.
- 19 percent were single females.
- Nine percent each were single males and unmarried couples.
- Veterans and active-duty military represented 20 percent of buyers.
The number of first-time homebuyers nationally declined to 31 percent in 2020 – down from 33 percent last year. According to NAR, “This is the lowest share since 1987 when it was 30 percent.” The Association says first-time homebuyers had the advantage of record low interest rates but faced scarce inventory and rising prices. However, the same may not be said about every market. Julie Minto, a broker at LLB&B Real Estate in Mobile, saw an increase in first-time homebuyers.
“People on the fence of renting and buying have found that the current low interest rates make a monthly mortgage payment lower than their monthly rent payment. This has opened up a great opportunity for the first-time buyer market and they are taking advantage of it!”
Rising prices and lower inventory affected other types of buyers as well. The survey found buyers purchasing more expensive homes and buying them more quickly. Last year’s report found buyers taking 10 weeks to search for a home compared to only eight weeks this year.
"With many people using their dining room table as their office, there has been an uptick with buyers looking for a home office,” said RealtySouth President and CEO Richard Grimes of Birmingham. “Those same buyers are looking for a great outdoor area and extra living space for a little more peace-of-mind in their working-home. The buyer need coupled with the incredibly low interest rates, we see buyers making offers on the spot."
In addition to home offices and great outdoors spaces, what were buyers looking for in 2020?
- 15 percent purchased new homes and 85 percent purchased previously-owned homes.
- Those purchasing new homes were looking to avoid renovations and problems with major systems.
- Detached single-family home purchases were most common at 81 percent, followed by townhomes at seven percent.
- “Senior” housing purchases accounted for 12 percent.
- A 1,900-square foot home with three bedrooms and two bathrooms built in 1993 was the typical home purchased, and it was located within 15 miles of the buyer’s previous home.
- Buyers paid a median of $272,500 and typically paid 99 percent of the listing price.
“The majority of homebuyers that we worked with purchased previously-owned homes by a ratio of 2:1 over new construction,” said Lee Harris Broker/Owner at Coldwell Banker Alliance and 2020 President of the Lee County Association of REALTORS®. “Nearly all of the purchasers who originally wanted new construction homes ended up sticking to their original plan and purchased new. However, some of the purchasers who originally claimed they did not want new construction ultimately changed their mind when confronted with the convenience of purchasing new.” Kathy Mann found that some homebuyers opted for new construction because of low inventory of existing homes at their price point.
As for “senior” housing, Harris says the Auburn market has always been attractive to seniors. “Local builders have started to tap into that market recently by providing ‘senior living’ neighborhoods. Because of these new options, we have seen an increase of people who prefer to live in a community where everyone is at a similar stage in life. The style of homes ranges from quadplexes to single-family detached, however most share a common characteristic of HOA fees that include landscape maintenance,” says Harris.
While buyers were willing to pay more, they relied heavily on real estate professionals to help them find the right home. Agents or brokers assisted 88 percent of homebuyers and six percent purchased homes from a builder or his agent. Friends, neighbors and relatives accounted for 40 percent of referrals to agents and 13 percent chose to work again with an agent from a previous purchase or sale. 91 percent of buyers said they would recommend their agent to others. Minto believes her company has a healthy mix of referrals and clients generated from online listings. “Personally, I have been in the business for 30 years. I am blessed to have a strong referral base I have built,” said Minto.
Selling a Home in 2020
Like last year, most sellers had lived in their homes for 10 years before selling for a median increase of $66,000 more than their purchase price. Nearly half of sellers attracted buyers by offering an incentive. Minto agreed that homes are selling faster.
“We joke with sellers: ‘Be careful if you mention that you may be willing to sell your house! We will sell it before you say, maybe!’ For one that is in good, updated condition that is priced right…we will have it sold within days and often times with multiple offers,” Minto continued. “Buyers need to be preapproved and ready to pounce! This market is HOT!”
The Bottom Line
“While every year is a unique time capsule where buyers and sellers purchase amid a changing economic environment, 2020 is especially distinctive as COVID-19 impacted Americans’ lives starting in March 2020,” said NAR. In Alabama, REALTORS® felt the impact but adapted to the challenges. RealtySouth in Birmingham made history with Alabama’s first 100% fully remote closing in March – just days after Governor Kay Ivey’s order restricting businesses and gatherings. The event took place by video conferencing with the buyers, closing attorney, loan officer, and managing broker remotely present for the event. "When the coronavirus first swept through Alabama, most home buyers went dormant for a minute,” said Richard Grimes. “Once the shift to virtual open houses and virtual closings were put into place, home buyers came out with a vengeance. Buyers are trying to make up for time they lost looking for their dream home."
“It's easy to say things like 'we had a great year' or 'the market is still hot,” Lee Harris said. “That may all be well and true, but I always say, ‘The numbers never lie.’ In 2020, our average listing was scooped up by a purchaser in 39 days. For the same period a year prior, it was 44 days. I think these numbers indicate that while COVID-19 changed the way we physically handle business and interact with clients, it did not have a significant impact on how long it takes a purchaser to make a decision about housing.”
From Huntsville to Mobile and markets in between, survey results and boots-on-the-ground experiences indicate that REALTORS® and their clients capitalized on the opportunities and challenges of 2020.