I have been struggling to write this article all week. Like a bolt of lightening the reason hit me at 2:33 a.m. last night that I am dazed and confused about what’s happening. I am also dazed and confused about how to react. I have been in the real estate industry for the last 40 years so I can’t imagine how confusing this must be to the consumers.
A recent comment by one of my clients kind of hit me over the head to sort out truth from myth. The comment was that with the way homes are flying off the shelf, he would not need to repair/stage anything in his house. Now mind you, there are countless stories of houses selling for over list price in the first weekend with multiple offers. However, not much is said about the houses that end up with price reductions, go back on the market when a contract falls apart and the homes that stay on the market a couple of months with no offers. Check out this article for tips on selling your home.
His comment started me on a crazy path of research trying to figure things out. The first statistics I ran are shown below. The data is for the cities of: CWE, Clayton, Ladue, Maplewood/Richmond Heights and Kirkwood. The time period is the last ten years. The downward trend in average days on the market started in 2014 – 2016. However the number of sales in each municipality was fairly consistent throughout the ten years.
Myth: even though the homes are selling faster, homes that are not in good condition/staged are not selling in one weekend evidenced by the average number of days on the market.
This set me off in the direction of how many homes are actually available if you were looking for a home today. Using the same five municipalities, I ran stats for currently active listings and average days on the market. One of the biggest takeaways from this number is Maplewood/Richmond Heights. Notice how “hot” that market is. Interestingly the median sale price in that area is $251,750.
Truth: The market is “hot” and some price points are very “hot” spiking prices and bringing multiple offers.
Which brings us to another housing statistic from the National Association of Realtors. In this research, they grouped Millennials together (age 22 to 40 years of age) and this group continues to make up the largest share of home buyers at 37%. Another interesting fact from their research indicates that Millennials have been the largest share of buyers since 2014. Gen Xers (age 41 to 55) made up 24% of recent buyers and had the highest earnings with a median income of $113,300 in 2019.
For the report, buyers 56 to 65 (Younger Baby Boomers) and buyers 66 to 74 (Older Baby Boomers) were broken into two separate categories as they have differing demographics and buying behaviors. Buyers 56 to 65 consisted of 18% of recent buyers and buyers 66 to 74 consisted of 14% of recent buyers. Buyers 75 to 95 (The Silent Generation) represented the smallest share of buyers at 5%. Baby Boomers made up the largest share of sellers at 43%. Source: National Association of Realtors
More Dazed and Confused
There are a multitude of articles about Millennials and how they are buying real estate. Many of them cancel each other out with opposite facts. The Forbes article on How Millennials Are Changing the Mortgage And Home Buying Market seemed to coincide with my experience in a number of ways. One of the most significant is their ease and ability to use the internet for information. This is true for them in finding homes and mortgages. Years ago, borrowers wanted a personal relationship with their lender, the lenders were local as opposed to global and there were only a handful from which to choose. Six out of the top 10 lenders were non-banks as of 2017.
The Millennials have also changed the role of real estate agents. I am having a little bit of an ego problem with this. Earlier in my career, my job was gathering information for buyers and sellers. Now realtors value comes in the form of negotiation skills, valuable relationships and the ability to facilitate the home buying process in a digital world. Most of my communication is through texts.
Truth: Nothing I do in my job today is the same as it was 35 years ago.
Articles and surveys abound claiming Millennials, the largest group of buyers, are not interested in or capable of buying homes that aren’t turnkey. My experience would certainly confirm this. The Gen Xers make up 24% of the buyers and have the highest earners and they also are mainly interested in turnkey. Here are two articles I need to share about this: Repairs that Millennials Admit they Can’t Do Including Millions Who Can’t Change A Light Bulb; Over 80 Percent of Millennials Have Done a DIY Home Improvement Project During Pandemic Shutdown (I think one may have been written by a Millennial.)
It seems to be slowing down a bit in recent weeks. Some people have dropped out of the market rather than deal with the frenzy. Listed below are some actions many buyers have been forced to try to get an accepted contract is:
- have an appointment window of just fifteen minutes to actually view the house
- be likely to accept the pressure to make an offer in a short period of time
- make all cash offers with no appraisal contingencies
- remove inspection contingencies
- pay thousands over asking price (sometimes as much as $100K)
Would you be willing to take these actions in order to buy a house?
Do you think this is something you are going to have to risk because the low inventory and frenzy are not going to end soon? OR
Do you think the market is going to bust?