REALTORS® CONFIDENCE INDEX SURVEY
Report on the July 2016 Survey
The REALTORS® Confidence Index (RCI) report provides monthly information about real estate
market conditions and expectations, buyer/seller traffic, price trends, buyers’ characteristics, and
issues affecting real estate transactions based on a monthly survey of REALTORS®.
The July 2016 report is based on the responses of 3,454 REALTORS®, 2,190 of which closed a
sale. 1 Respondents reported on local market conditions experienced in July and the
characteristics of their most recent sale for the month. The data is collected from a random
sample of REALTORS® and is viewed to be representative of the sales for the month. The online
survey was conducted from August 2–9, 2016. All real estate is local: conditions in specific
markets vary from the overall national trends presented in this report. REALTORS® may be
interested in comparing their markets against the national summary.
The RCI report is an output of the Research Division of the NATIONAL ASSOCIATION of
REALTORS®. 2 For questions or information about this report, please email [email protected].
Lawrence Yun, Senior Vice President and Chief Economist
Danielle Hale, Managing Director, Housing Research
Gay Cororaton, Research Economist
Meredith Dunn, Research Communications Manager
Research Division
NATIONAL ASSOCIATION of REALTORS®
500 New Jersey Avenue, NW
Washington, DC 20001
202.383.1000
1
The survey is sent to 50,000 REALTORS® who are selected through simple random sampling. To increase the response rate,
the survey is also sent to respondents in the previous three surveys who provided their email addresses. The number of responses
to a specific question varies because the question may not be applicable to the respondent or because of non-response. To
encourage survey participation, eight REALTORS® are randomly selected to receive a gift card.
2
The team acknowledges Jessica Lautz, Managing Director, Survey Research and Communications, Meredith Dunn, Research
Communications Manager, Amanda Riggs, Research Survey Analyst, and Brandi Snowden, Research Survey Analyst, for their
inputs in improving the survey and in editing and disseminating the report. Acknowledgement also goes to Lisa Herceg, Director,
Marketing Research, who sends out the survey to members.
1
Table of Contents
Summary .................................................................................................................................................... 3
I.
Market Conditions ............................................................................................................................ 4
REALTORS® Largely Reported Strong Market Activity in July 2016 ................................................... 4
REALTORS® Are Generally Optimistic Over the Next Six Months ...................................................... 4
REALTORS® Reported Strong Buyer Traffic Amid Tight Supply ......................................................... 7
REALTORS® Expect Slower Price Growth in Next 12 Months ........................................................... 11
Properties Typically on the Market for 36 Days ..................................................................................... 12
II. Buyer and Seller Characteristics ......................................................................................................... 14
Sales to First-Time Buyers: 32 Percent of Sales ..................................................................................... 14
Buyers 34 years and under: 30 Percent of Homebuyers ......................................................................... 16
Former Renters: 41 Percent of Homebuyers ........................................................................................... 17
Sales for Investment Purposes: 11 Percent of Sales .............................................................................. 18
Distressed Sales: Five Percent of Sales................................................................................................... 18
Cash Sales: 21 Percent of Sales .............................................................................................................. 19
Buyer Downpayments ............................................................................................................................. 20
III. Issues Affecting Transactions ............................................................................................................ 21
Contract Settlement: Financing, Home Inspection, and Appraisals are Major Issues ............................ 21
2
Summary
While local conditions vary, the REALTORS® confidence and buyer traffic indices indicate that
market conditions in July 2016 were mostly “strong” rather than “weak”, driven by sustained job
growth and a low interest rate environment. 3 The indices for all property types were higher in
July 2016 compared to one year ago, indicating a strengthening of market conditions. However,
they were lower than June 2016, partly from seasonality effects and also from underlying
demand, supply, and price conditions. The seller traffic index indicates that inventory remains
tight, pushing prices up to increasingly less affordable levels.
First-time homebuyers accounted for 32 percent of sales, up from 28 percent one year ago.
Purchases for investment purposes made up 11 percent of sales, while distressed properties
dipped to five percent of sales. Cash sales accounted for 21 percent of sales. Nationally, amid
tight supply, half of properties that sold in July 2016 were on the market for 36 days or less
compared to 42 days one year ago.
Very low supply, declining affordability, appraisal issues, and lender processing delays were
reported as the key issues affecting sales. Still, most respondents were confident about the
outlook for the next six months across all property types, with the six-month confidence indices
registering over 50 and also higher than one year ago. With home prices increasingly becoming
less affordable, respondents typically expected prices to increase at a slower pace of 3.3 percent
in the next 12 months.
July 2016 REALTORS® Confidence Index Survey Highlights
RCI Current Conditions: Single-Family Sales
RCI Six-Month Outlook: Single-Family Sales
RCI Buyer Traffic Index
RCI Seller Traffic Index
4
First-Time Home Buyers, as Percent of Sales
Sales to Investors, as Percent of Sales
Cash Sales, as Percent of Sales
Distressed Sales, as Percent of Sales
Median Days on Market
Median Expected Price Growth in Next 12 Months (%)
July 2016
71
69
64
45
32
11
21
5
36
3.3
June 2016
74
73
67
47
33
11
22
6
34
3.6
July 2015
68
68
62
46
28
13
23
7
42
3.6
3
An index greater than 50 indicates the number of respondents who reported “strong” (index=100) outnumbered those who
reported “weak” (index=0). An index equal to 50 indicates an equal number of respondents reporting “strong” and “weak”
market conditions. The index is not adjusted for seasonality effects.
4
NAR’s 2015 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 32 percent were
first-time home buyers. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS®
and also captures purchases for investment purposes and vacation/second homes.
3
I.
Market Conditions
REALTORS® Largely Reported Strong Market Activity in July 2016
While local conditions vary, the REALTORS® Confidence Index—Current Conditions indices for
all property types each registered at 50 or above in July 2016. 5 The indices for all property types
were higher in July 2016 compared to one year ago, indicating a strengthening of market
conditions from one year ago. The index for single-family homes was at 71 (74 in June 2016; 68
in July 2015). The index for townhomes was at 54 (55 in June 2016; 49 in July 2015). The index
for condominiums was at 50 (52 in June 2016; 45 in July 2015). An index above 50 means more
respondents reported markets as “strong” rather than “weak” while an index at 50 indicates that
an equal number of respondents indicated that conditions were strong and weak with the balance
saying that conditions are moderate.
REALTORS® Confidence Index—Current Conditions
as of July 2016
80
71
60
54
50
40
20
200801
200806
200811
200904
200909
201002
201007
201012
201105
201110
201203
201208
201301
201306
201311
201404
201409
201502
201507
201512
201605
0
Single-family
Townhome
Condominium
REALTORS® Are Generally Optimistic Over the Next Six Months
While market expectations vary, REALTORS® remained generally confident about the outlook
over the next six months. 6 The indices were higher in July 2016 compared to one year ago across
all property types, and each index also registered above 50, indicating a favorable outlook. The
REALTORS® Confidence Index—Six-Month Outlook for single-family homes registered at 69 (73
in June 2016; 68 in July 2015) . The confidence index for townhomes was at 54 (56 in June
5
Respondents are asked “How would you describe the current housing market where you make most of your sales? For singlefamily homes? Townhomes? Condominiums?” The responses for each type of property are compiled into an index. An index of
50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having
moderate (=50) expectations. The index is not adjusted for seasonal factors.
6
Respondents were asked “What are your expectations for the housing market over the next six months compared to the current
state of the market in the neighborhood(s) or area(s) where you make most of your sales?” The responses for each type of
property are compiled into an index. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong”
(index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.
4
2016; 51 in July 2015), while the index for condominiums was at 51 (52 in June 2016; 47 July
2015).
One positive development for the condominium market is the approval of H.R. 3700, the
“Housing Opportunity Through Modernization Act of 2016”. 7 Among other measures, the law
eases access to FHA condominium financing by reducing the FHA condo owner occupancy ratio
from 50 percent to 35 percent, directing the FHA to streamline the condominium re-certification
process, and providing more flexibility for mixed-use buildings.
REALTORS® Confidence Index—Six-Month Outlook
as of July 2016
100
69
54
80
60
51
40
20
200801
200805
200809
200901
200905
200909
201001
201005
201009
201101
201105
201109
201201
201205
201209
201301
201305
201309
201401
201405
201409
201501
201505
201509
201601
201605
0
Single-family
Townhome
Condominium
The following maps show the REALTORS® Confidence Index—Six-Month Outlook across
property types by state. 8 In the single-family homes market, the market outlooks in the next six
months range from “strong” to “very strong” in the District of Columbia and all states, except
Alaska and Connecticut, where the outlook is “weak.” In the townhomes market, the outlook is
more varied, ranging from “very weak” in Alaska to “strong” in the District of Columbia and
several other states. In the condominium market, the outlook is also more mixed, varying from
“very weak” in Alaska, Wyoming, and West Virginia to “very strong” in the District of
Columbia.
7
The bill, which was championed by NAR, passed the House of Representatives 427-0 and the Senate under unanimous consent
on July 14, 2016 and was signed by President Obama on July 29, 2016. See http://www.realtor.org/articles/president-obamasigns-hr-3700
8
The market outlook for each state is based on data for the last three months to increase the observations for each state. Small
states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., June have fewer than 30 observations. Respondents rated
conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion
index. A diffusion index greater than 50 means that more respondents rated conditions as “Strong” than “Weak.” For graphical
purposes, states with index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled “Weak,” a
value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are labeled “Very
strong.”
5
6
REALTORS® Reported Strong Buyer Traffic Amid Tight Supply
Local conditions vary, but the REALTORS® Buyer Traffic Index registered at 64 (67 in June
2016; 62 in July 2015), indicating that more respondents viewed buyer traffic conditions as
“strong” rather than “weak.” Meanwhile, supply conditions remained, by and large, tight in
many areas. The REALTORS® Seller Traffic Index registered at 45 (47 in June 2016; 46 in July
2015), indicating that more respondents viewed seller traffic conditions as “weak” rather than
“strong.”
64
45
200801
200806
200811
200904
200909
201002
201007
201012
201105
201110
201203
201208
201301
201306
201311
201404
201409
201502
201507
201512
201605
80
70
60
50
40
30
20
REALTORS® Buyer and Seller Traffic Indexes
as of July 2016
(50 = "Moderate" Conditions)
Buyer Traffic Index
Seller Traffic Index
7
Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that
markets were “moderate” to “very strong” in all states except in Wyoming and Connecticut
where buyer traffic was “weak.” 9
Amid strong demand, seller traffic was “weak” in many states, measured by the REALTORS®
Seller Traffic Index. 10 However, seller traffic was “moderate” to “strong” in several states,
including those that had benefited from the oil boom but who are now facing slower job growth
because of lingering lower oil and natural resources prices—North Dakota, New Mexico, Texas,
and Louisiana.
9
The index for each state is based on data for the last three months to increase the observations for each state. Small states such
as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., June have fewer than 30 observations. Respondents were asked “How do you
rate the past month's buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated
conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion
index. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled
“Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are
labeled “Very strong.”
10
Respondents were asked “How do you rate the past month's seller traffic in the neighborhood(s) or area(s) where you make
most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The
responses are compiled into a diffusion index. A value of 50 indicates a balance of respondents who reported “Strong “and
“Weak” markets. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are
labeled “Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than
76 are labeled “Very strong.”
8
Employment conditions affect the demand and supply for housing. The chart that follows shows
the change in non-farm employment in June 2016 from June 2015 by state. Non-farm
employment contracted in the oil-producing states of North Dakota, Wyoming, and Louisiana
and increased only modestly in several other natural resources states in the Midwest and South. 11
The slower job growth and job cutbacks in these states are likely leading to more seller traffic
and a shift to a buyer’s market. 12 Meanwhile, several other oil-states such as Utah, Colorado,
Montana, Texas and New Mexico have job growth near to or above the national average.
Employment growth was strongest in Washington, Oregon, California, Idaho, Utah, Arizona,
Florida, and Delaware. Buyer traffic was “strong” to “very strong” in these states.
11
For a review of states in which oil has an outsized economic impact, see this blog:
http://economistsoutlook.blogs.realtor.org/2016/03/21/is-california-an-oil-producing-state/
12
https://communityimpact.com/houston/the-woodlands/economic-development/2015/12/09/falling-oil-prices-starting-to-affectwoodlands-economy/; http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/
9
Tight inventory has led to multiple offers on homes and elevated price growth. As of July 2016,
41 percent of homes were sold at or above the list price, up from 36 percent one year ago. As of
June 2016, the inventory of existing homes listed on the market as of the end of the month was
enough to last 4.6 months at the current pace of sales. Historically, home prices increase at a
more rapid pace when inventory is less than six months’ supply.
Share of Homes Selling At or Above the List Price
as of July 2016
45%
40%
35%
41%
30%
25%
201212
201302
201304
201306
201308
201310
201312
201402
201404
201406
201408
201410
201412
201502
201504
201506
201508
201510
201512
201602
201604
201606
20%
10
Year-on-year Percent Change in Median Home Price vs.
Months' Supply of Existing Home Sales
20%
15.0
5% 10%
10.0
0%
5.0
4.6 -10%
-20%
200001
200010
200107
200205
200301
200310
200407
200504
200601
200610
200707
200804
200901
200910
201007
201104
201201
201210
201307
201404
201501
201510
0.0
Months' Supply of Existing Home Sales
Year-on-year change in Median Price of Existing Home Sales
Source of data: NAR
REALTORS® Expect Slower Price Growth in Next 12 Months
The map below shows the median expected price change in the next 12 months among
REALTORS® who responded to the May–July 2016 RCI surveys. Price expectations vary by
area, and the median expected price change is a measure that represents the middle value of the
distribution of responses.
In the District of Columbia, Washington, Oregon, and Colorado, the median expected price
growth was more than five to six percent. REALTOR® respondents from Idaho, Tennessee,
South Carolina, and Florida also expected strong price growth, with the median expected price
growth at more than four to five percent in each of these states. REALTOR® respondents from
North Dakota, Alaska, Vermont, and Connecticut expected the slowest price growth, with the
median expected price growth at no more than two percent in each of these states.
Nationally, the median expected price growth is 3.3 percent (3.6 percent in June 2016; 3.6
percent in July 2015). Respondents may be expecting slower price growth given that home prices
have become increasingly less affordable. NAR’s data on closed sales of the 178 metropolitan
statistical areas (MSAs) it tracks shows that prices are increasing at a slower pace or contracting
in some areas. In the second quarter of 2016, the median price of single-family homes increased
from their year-ago levels in 148 out of 178 MSAs (83 percent), fewer than the 154 MSAs (87
percent) where the median price increased in the first quarter of this year compared to their yearago levels. 13 Most of the metro areas where prices are increasing at a slower pace are in the West
and in Florida where prices have slowed but are still rising faster than is considered normal.
Meanwhile, the median sales prices of single-family homes fell in 29 metro areas in the second
quarter of 2016 compared to their year-ago levels, an increase from the 24 metro areas that saw
price declines in the first quarter of 2016 compared to their year-ago levels. This includes metro
13
http://www.realtor.org/news-releases/2016/08/home-price-gains-unfettered-in-most-metro-areas-during-second-quarter
11
areas in Texas, New Mexico, North Dakota, New York, Massachusetts, Connecticut, Wisconsin,
Illinois, Missouri, and North Carolina.
Properties Typically on the Market for 36 Days
Properties stayed on the market for fewer days in July 2016 compared to one year ago amid
strong demand amid tight supply. Nationally, properties sold in July 2016 were typically on the
market for 36 days (34 days in June 2016; 42 days in July 2015). 11 Short sales were on the
market for the longest time at 95 days, while foreclosed properties typically stayed on the market
for 54 days. Non-distressed properties were typically on the market for 34 days.
11
Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time
to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the
market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30
observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., June have fewer than 30 observations.
12
Median Days on Market of Sales Reported by
REALTOR® Respondents as of July 2016
200
All: 36
Foreclosed: 54
Short sale: 95
Non-distressed: 34
150
100
50
201105
201108
201111
201202
201205
201208
201211
201302
201305
201308
201311
201402
201405
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201411
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0
All
Foreclosed
Short sale
Non-distressed
Nationally, 47 percent of properties were on the market for less than a month 14. Ten percent of
properties were on the market for six months or longer.
60%
50%
Percentage Distribution of Time on Market of Sales Reported by
REALTOR® Respondents as of July 2016
47%
40%
30%
20%
10%
18%
13%
7%
3%
0%
3%
4%
2%
4%
Less than 1 to less 2 to less 3 to less 4 to less 5 to less 6 to less 9 to less
12
1 month than 2 than 3 than 4 than 5 than 6 than 9 than 12 months
months months months months months months months or more
201507
201606
201607
At least half of the properties that sold in May–July 2016 were on the market for less than 31
days in the District of Columbia and in 17 states, mostly in the West, Midwest, and South
regions. Local conditions vary, and the data is provided for REALTORS® who want to compare
local markets against other states and the national summary.
14
Days on market usually refer to listing to contract date.
13
II. Buyer and Seller Characteristics
Sales to First-Time Buyers: 32 Percent of Sales
The share of first-time home buyers accounted for 32 percent of residential sales in July 2016 (33
percent in June 2016; 28 percent in July 2015). 12 Sustained job creation, a low interest rate
environment, and measures to loosen credit tightness appear to be helping first-time buyers.
From October 2010 through July 2016, the economy generated 14.1 million net new jobs, which
is more than the 8.9 million jobs lost during the Great Recession. Meanwhile, as of July 2016,
the average contract rate on 30-year conventional mortgages edged down further to 3.4 percent
from 4.1 percent in July 2015. The 50 basis points reduction in FHA’s annual mortgage
insurance premium payment since January 2015 has also reduced the cost of obtaining a
mortgage, benefiting first-time homebuyers. 15
12
First-time buyers accounted for about 32 percent of all home buyers based on data from NAR’s 2015 Profile of Home Buyers
and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does
cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures
purchases for investment purposes and second homes for existing homes.
15
“July 2016 Housing Finance at a Glance”, Urban Institute Housing Finance Policy Center. FHA’s annual mortgage insurance
premium decreased from 1.35 percent to 0.85 percent for cases starting January 26, 2015. The new rates apply to purchase loans
of $625,000 or lower. Loans above this value are charged a premium of 1.05 percent. See
http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000879-Housing-Finance-at-a-Glance-A-Monthly-ChartbookJuly-2016.pdf
14
First-time Buyers as Percent of Residential Market
as of July 2016
60%
50%
40%
32%
30%
20%
10%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602
201606
0%
However, tight supply has created an upward pressure on prices, making a purchase less
affordable. Saving for a downpayment is also more difficult, especially for first-time buyers who
do not have the home equity repeat buyers have and who may be facing steep increases in rent.
As of June 2016, the median family income is up by 11 percent compared to the level in January
2012, while the median price of an existing home is up by 62 percent over this same period 16.
Homes are still generally affordable, but the gap between actual and qualifying income of firsttime homebuyers has narrowed. As of the second quarter of 2016, NAR estimates that the
median income of first-time homebuyers is $44,703, only slightly above the qualifying income
of $42,720. 17
Index of Median Existing Home Prices and Median Family
Income as of June 2016 (Jan 2012=100)
180
160
140
120
100
80
162
May/2016
Feb/2016
Nov/2015
Aug/2015
May/2015
Feb/2015
Nov/2014
Aug/2014
May/2014
Feb/2014
Nov/2013
Aug/2013
May/2013
Feb/2013
Nov/2012
Aug/2012
May/2012
Feb/2012
111
NAR Median Home Price (Jan 2012=100)
Median Family Income (Feb 2012=100)
16
NAR data used in calculating the Home Affordability Index.
Starter home price at $204,600, 20 percent downpayment, effective interest rate plus mortgage insurance at 4.1 percent, and
assuming monthly housing expense is no more than 25 percent of gross income.
17
15
Actual Income vs. Qualifying Income Needed by First-time
Buyer to Purchase a Home as of 2016Q2
$60,000
$44,703
$40,000
$42,720
$20,000
Q1/2000
Q4/2000
Q3/2001
Q2/2002
Q1/2003
Q4/2003
Q3/2004
Q2/2005
Q1/2006
Q4/2006
Q3/2007
Q2/2008
Q1/2009
Q4/2009
Q3/2010
Q2/2011
Q1/2012
Q4/2012
Q3/2013
Q2/2014
Q1/2015
Q4/2015
$-
NAR First-time Homebuyer: Prime Median Income, United States (Dollars)
NAR First-time Homebuyer: Qualifying Income, United States (Dollars)
Buyers 34 years and under: 30 Percent of Homebuyers
Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 30 percent
of residential buyers. Younger buyers generally have more modest incomes, smaller savings, and
weaker credit profiles than repeat and older buyers, so they are likely to be impacted more by
rising home prices and have greater difficulty saving for a downpayment and obtaining mortgage
financing. Attaining homeownership is more difficult for younger buyers: according to NAR’s
2016 Q2 Housing Opportunities and Market Experience (HOME) Survey, 65 percent of those
ages 34 and under think that now is a good time to buy a home, a lower fraction compared to the
74 percent among all age groups. Among respondents ages 34 and under who currently do not
own a home, 60 percent think it is difficult to qualify for a mortgage given their current financial
situation. 18
18
http://www.realtor.org/reports/housing-opportunities-and-market-experience-survey
16
Age Distribution of Buyers for Sales Reported by
REALTOR® Respondents as of July 2016
60%
50%
40%
30%
20%
10%
0%
47%
30%
Age 34 and under
Age 35 to 55
201607
201605
201603
201601
201511
201509
201507
201505
201503
201501
201411
201409
201407
201311
201307
23%
Age 56 and over
Former Renters: 41 Percent of Homebuyers
Homebuyers who were renting prior to their recent home purchase accounted for 41 percent of
sales (41 percent in June 2016; 37 percent in July 2015). Given only modest gains in income, the
steep increase in home prices and rising rent payments are making saving for a downpayment
and qualifying for mortgage more challenging for renters in many areas. Some areas, such as in
the South and Midwest, however, remain affordable. 19 In a recent study, NAR found that in the
top ten most affordable metro areas, roughly two of every five renters had sufficient income to
qualify to purchase a median priced home with a modest downpayment.
Living Status of Homebuyers at Time of Home Purchase as of
July 2016
60%
50%
40%
41%
20%
9%
201606
201604
201602
201512
201510
201508
201506
201504
201502
201412
201410
201408
0%
Rents an apartment or house
Lives in own home
Lives with parents, relatives, or friends
19
See NAR Research study on Top Markets Where Renters Can Afford to Buy, http://www.realtor.org/newsreleases/2016/08/nar-identifies-top-markets-where-renters-can-afford-to-buy.
17
Sales for Investment Purposes: 11 Percent of Sales
Investment sales made up 11 percent of sales (11 percent in June 2016; 13 percent in July 2015).
At their peak in 2009, investment sales were 25 percent of sales. Purchases for investment
purposes have generally been on the decline with fewer distressed sales on the market and with
home prices rising to levels that make the purchase less attractive as an investment. Low
mortgage rates are less of a benefit to investors since many of them use cash to purchase a
home. 20
Sales for Investment Purpose as Percent of Residential Sales
as of July 2016
30%
25%
20%
15%
11%
10%
5%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602
201606
0%
Distressed Sales: Five Percent of Sales
Distressed sales accounted for five percent of sales (six percent in June 2016; seven percent in
July 2015). Foreclosed properties were four percent of residential sales, while short sales were
only one percent of residential sales. 13 With rising home values and fewer foreclosures, the share
of sales of distressed properties has generally continued to decline. Distressed sales accounted
for about a third to half of sales until 2012 when they began to fall below this level.
20
13
See page 18, section on Cash Sales.
The survey asks respondents who had a sale in the month to report on the characteristics of the most recent sale closed.
18
60%
Distressed Sales as Percent of Residential Sales
as of July 2016
50%
Foreclosed: 4% Short sale: 1%
40%
30%
20%
10%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602
201606
0%
Foreclosed
Short sale
Cash Sales: 21 Percent of Sales
Purchases that were financed with cash were 21 percent of sales (22 percent in June 2016; 23
percent in July 2015). Buyers of homes for investment purposes, second homes, and foreign
clients are more likely to pay cash than first-time home buyers. As the shares of investment and
distressed sales to total sales have declined, so has the share of cash sales.
Cash Sales as Percent of Residential Sales
as of July 2016
21%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602
201606
40%
35%
30%
25%
20%
15%
10%
5%
0%
19
Percent of All-Cash Sales By Type of Buyer
in July 2016
80%
70%
60%
50%
40%
30%
20%
10%
0%
70%
56%
45%
44%
13%
Investor
Distressed
sale
International Second home Relocation
7%
First-time
buyer
*The RCI survey captures only non-U.S. citizens whose permanent residence is in another country
(Type A). NAR has a separate survey on foreign buyers that captures both Type A buyers and nonU.S. citizens who reside in the United States on work, student, or other types of visas (Type B).
Buyer Downpayments
Among all buyers who are financing a home purchase, 39 percent made a downpayment of at
least 20 percent, a share that has remained about the same since NAR began collecting this
information in 2011. A higher downpayment reduces the monthly mortgage payments on a loan,
but saving for a higher downpayment could mean delaying homeownership and the potential to
build up equity sooner. Buyers with larger downpayments are likely repeat homebuyers who
have built up equity by owning a previous home or those who have saved long enough to make
the larger downpayment.
Percent of Mortgage Sales With Downpayment of
At Least 20 Percent as of July 2016
50%
40%
39%
30%
20%
10%
201104
201107
201110
201201
201204
201207
201210
201301
201304
201307
201310
201401
201404
201407
201410
201501
201504
201507
201510
201601
201604
201607
0%
20
Among sales to first-time buyers who purchased a property in May–July 2016 and who obtained
a mortgage, 68 percent made a downpayment of zero to six percent. While this share is down one
percentage point from last month, it is two percentage points higher than one year ago and seems
to have been on a modestly improving trend since bottoming in early 2014. Recent moves
intended to make credit more widely available to those who only make minimal downpayments
have likely caused this shift. These moves include FHA’s reduction of its annual mortgage
insurance premiums and the acceptance of GSEs of three percent downpayment mortgages. In
February 2016, the Federal Housing Finance Authority (FHFA), which regulates the GSEs, also
made further improvements to its Representation and Warranty Framework by having a third
party resolve loan-level disputes between the GSEs and loan lenders regarding breach of
warranties on originated loans. This move provides more certainty for lenders which can increase
the access to credit in the primary market. 21
Share of First-time Buyers Obtaining a Mortgage Who Put
in a Zero to Six Percent Downpayment as of July 2016*
90%
85%
80%
75%
70%
65%
60%
55%
50%
200906
200912
201004
201008
201012
201104
201108
201112
201204
201208
201212
201304
201308
201312
201404
201408
201412
201504
201508
201512
201604
68%
*The data reported for the month is a rolling three-month figure.
III. Issues Affecting Transactions
Contract Settlement: Financing, Home Inspection, and Appraisals are Major Issues
In reporting on their last contract that went into settlement or was terminated over the period
May–July 2016, respondents indicated that 63 percent of contracts were settled on time, 32
percent had delayed settlement, and six percent were terminated.
21
http://www.fhfa.gov/PolicyProgramsResearch/Policy/Pages/Representation-and-Warranty-Framework.aspx
21
How Sales Contracts Were Settled
100%
80%
60%
40%
20%
0%
6%
32%
63%
Contract was terminated
Contract was delayed but eventually went into settlement
Contract was settled on time
* Based on the respondent's most recent contract that went into settlement or was terminated
during this three-month period.
Among contracts that had a delayed settlement (32 percent), financing, appraisal, and home
inspection issues were the primary causes of the delay.
Problems Encountered for Contracts That Were Delayed But Eventually
Went Into Settlement in May–July 2016*
(Delayed Contracts Represent 32 Percent of Closed or Terminated
Contracts)
Issues related to obtaining financing
41%
Appraisal issues
27%
Home inspection/environmental issues
11%
Titling/deed issues
10%
Contingencies stated in the contract
8%
No problems encountered
5%
Issues in buy/sell distressed property
4%
Home/hazard/flood insurance issues
2%
Buyer lost job
1%
Other
23%
*Based on the respondent's most recent contract that went into settlement or was terminated during this
period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer
or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, delays related to
complying with regulation, etc.
22
Among contracts that were terminated (six percent), issues related to the buyer obtaining
financing, home inspection, and appraisal were the major causes of termination.
Problems Encountered for Contracts That Were Terminated
in May–July 2016*
(Terminated Contracts Represent Six Percent of
Closed or Terminated Contracts)
Issues related to obtaining financing
Home inspection/environmental issues
Appraisal issues
17%
Issues in buy/sell distressed property
8%
Contingencies stated in the contract
7%
Titling/deed issues
5%
No problems encountered
3%
Buyer lost job
2%
Home/hazard/flood insurance issues
1%
Other
24%
28%
24%
*Based on the respondent's most recent contract that went into settlement or was terminated during this
period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes
buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, etc.
23
The NATIONAL ASSOCIATION of REALTORS®, “The Voice for Real Estate,” is
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institutes, societies, and councils, involved in all aspects of the real estate industry. NAR
membership includes brokers, salespeople, property managers, appraisers, counselors and
others engaged in both residential and commercial real estate. The term REALTOR® is a
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member of the National Association of REALTORS® and subscribes to its strict Code of
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for professional development, research, and exchange of information among its members,
and to the public and government for the purpose of preserving the free enterprise system and
the right to own real property.
The Mission of the NATIONAL ASSOCIATION of REALTORS® Research Division is to
collect and disseminate timely, accurate, and comprehensive real estate data and to conduct
economic analysis in order to inform and engage members, consumers, policy makers, and
the media in a professional and accessible manner.
To find out about other products from NAR’s Research Division, visit
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NATIONAL ASSOCIATION of REALTORS®
Research Division
500 New Jersey Avenue, NW
Washington, DC 20001
202.383.1000
24