By Gary Thomas, 2012 President-Elect, National Association of REALTORS®
There was so much helpful and interesting information presented at Annual. Sometimes it can be a little overwhelming! Only now, a few weeks later, am I catching up on all of the excellent information. One item that is particularly valuable and worth taking a closer look at is the results of our recent survey, The 2011 National Association of REALTORS® Profile of Home Buyers and Sellers. It’s a useful picture of the latest trends in real estate.
What stood out to me was that home buyers are:
- Have higher incomes
- Are more likely to be married
Naturally, those who can afford to spend more are generally older and have higher incomes. In fact, the median age for overall home buyers rose from 39 to 43. The number of married couples buying homes rose 6 percent, while purchases by singles and unmarried couples were slightly down.
Most troubling though, is the fact that the market share for first-time home buyers fell to 37 percent in the past year—down from a record high of 50 percent in 2010. Although the high was in part due to a boost in sales from the home buyer tax credit, that’s still a decrease larger than what we’d expect, based on the average. Over the past year, repeat buyers made modestly higher down payments than the previous year, but their incomes were a full 11 percent greater.
We can conclude that there are still buyers out there, but qualifying for a loan is harder. This is due to an overly restrictive mortgage credit environment, in spite of plenty of affordable housing.
The survey tells us just how tight the credit market remains
It underscores concerns that the American Dream of home ownership may soon be out of reach for younger Americans. Tighter credit rules, along with legislative proposals to reduce or eliminate the Mortgage Interest Deduction and narrow the definition of the Qualified Residential Mortgage (QRM), threaten the housing industry during a fragile stage of its recovery.
The effect of QRM regulation would be to raise down payments to 20 percent to meet the requirements of a qualified residential mortgage. This would disproportionately affect first-time and minority borrowers.
But the impact of QRM regulation would go far beyond these two groups. Higher rates will slow home sales and lower home prices for all buyers at the very worst time.
With Social Security facing fewer contributing workers in the future, a house remains an important equity investment for young people. Now is not the time to raise new barriers to home ownership.
I was heartened to see that most buyers believe in the long-term value of home ownership. Seventy-eight percent of recent home buyers said their home is a good investment, and 45 percent believe it’s better than stocks.
After hearing the stories from members, as well as my own clients, it was so stark to see the impact of such tight lending standard quantified in the numbers. This means that we should keep our heads down, work hard, and know that there are still plenty of buyers looking for the right home.