Here at Redfin, we try hard to figure out when real estate’s going up or down. Because we’re the only broker that employs agents with salary and benefits, market shifts can leave us with idle employees on the payroll, or with customers we have to refer to other brokers. Guessing wrong has cost us millions.
Fortunately, we have unique data. Unlike a pure website, Redfin knows who’s actually touring homes and writing offers. We can tell you whether more people toured homes this weekend as compared to last and how many decided on Sunday night to make an offer.
Unlike a traditional broker, Redfin stores the contact details and activity history of every customer, so we can provide more personalized service. In February 2012, we began surveying our customers to develop a real-time portrait of how 1,000+ active home-buyers feel about the market.
Today, we’re launching the survey results as a regular report, The Redfin Real-Time Home-Buyer Tracker, updated with data for the second quarter of 2012. What we found this quarter mostly is evidence of a strengthening market:
- 49% of respondents believe now is a good time to buy, down from 56% last quarter;
- 28% believe now is a good time to sell, up from 13% last quarter;
- 58% believe 2012 prices will increase, up from 34% last quarter;
- 63% cite low interest rates as the reason to buy now, down from 73% last quarter, but still the most popular rationale by a large margin;
- 60% cite low inventory as a primary reason not to buy this year, down from 63% last quarter, but still the most common complaint by a large margin;
- 58% of respondents said they were “very interested” in conventional sales, up from 48% last quarter; demand may be broadening beyond bargain-hunters shopping for foreclosures;
- 71% of respondents who had signed an offer reported facing competing offers; and
- 64% of all respondents had said they would be “disciplined” in a bidding war, paying only a little more, compared to 27% who said they would not compete at all, with 10% saying they would pay whatever it took.
This says to us that the U.S. real estate market will have limited sale volume growth due to low inventory and, as we have predicted many times before, that prices will probably continue to stabilize or increase modestly depending on the area. But there are caveats: buyers are very sensitive to increases in interest rates and other global economic events, like the possible collapse of the European currency. And outside of California, buyers are still fairly disciplined about prices.
The bottom-line in 2012 is that the global economy may drag down U.S. real estate, but it won’t be the other way around: in 2008 after all it was U.S. real estate that brought the global economy to its knees. Data and charts are below. If you’d like the data segmented by market or by other customer demographics, please contact press (at) redfin (dot) com. If there are questions you’d like us to include in the survey next time, please just leave a comment below.
The Q2 2012 Redfin Real-Time Home-Buyer Tracker
About the Report
From May 23 – May 30, 2012, Redfin sent a survey to 5,851 peopled who had toured properties with a Redfin agent since March 1, excluding anyone who did not indicate an intention to buy a home in the next 12 months. Twelve hundred and eight people responded across 18 metropolitan markets in the U.S.: Atlanta, Austin, Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, New York, Orange County, Philadelphia, Phoenix, Portland, Sacramento, San Francisco, Seattle, and Washington DC.
In the prior quarter, Redfin conducted a survey from February 22 – 29, 2012, soliciting 6,062 active Redfin home-buyers, with 1,457 responses. Redfin excluded February respondents from participating in the May survey.
Among active home-buyers planning to buy in the next year, most respondents reported either being under contract now or planning to buy in the next three months.
Shifting Toward a Seller’s Market
Forty-nine percent of respondents indicated now is “a good time to buy a home,” compared to 56% in the previous quarter:
Twenty-eight percent said now is “a good time to sell a home,” more than double the 13% reported in the previous quarter:
Over Half of All Buyers Now Believe Prices Are Rising
Only 9% of respondents expect 2012 home prices in their area to “rise a lot,” up significantly though compared to 2% last quarter; 49% expect prices to “rise a little” compared to 32% last quarter. Twenty-eight percent expect prices to “stay the same,” 10% expect prices to “drop a little,” and only 1% expect prices to “drop a lot.” Significantly, over half of respondents now believe prices are rising.
“What surprised me most was the difference in activity between classes of real estate,” said survey-respondent Ben Mahnke. “In Boston metro, entry-level condos in the urban core are seeing a lot of demand. But higher-priced single-family houses in the bedroom suburbs have been sitting unsold for years. The market is coming back, but only selectively.”
Low Interest Rates Drive Demand
The market is still sensitive to interest rates on mortgages. When asked “Why now, why are you planning to buy a home this year?” 63% of consumers cited “interest rates,” down from 73% last quarter but still the most popular response by far. Concern that prices “will soon begin to rise” was a motivating factor for 32% of respondents, compared to 19% a quarter ago.
Concerns about Low Inventory
When asked about your “major concerns with buying a home this year,” the most common response was “not enough good homes for sale” at 60%, down from 63% the quarter prior. Twenty-four percent cited concerns that the general economy could weaken, up from 20%.
“The global economy is a drag on any fast rebound in the residential market,” said Vincent Nyguen, an Orange County, California real estate investor who responded to the survey. For the first time, the survey asked about fatigue from bidding wars, chosen by 16%, and the concern that prices may rise beyond what the respondent can afford, chosen by 21%.
Experience with Bidding Wars, Wariness About Paying Too Much
In response to a new question, 71% of respondents who made one or more offers said they had faced competing offers, compared to 29% who had not. When asked another new question, about a likely reaction to “rising prices or homes that begin to get multiple offers,” 27% of respondents said they would step back to avoid a “short-term bubble,” while 64% of respondents said their reaction would be to “stay disciplined, paying a little more within reason.”
Only 10% said they would “do what it takes… to win a deal,” suggesting that demand is not strong enough to drive major price increases.
“We put two offers in on the day-of or the day-after the first open house and lost both,” said Laila Kassis, a would-be home-buyer in the Boston area. “One had seven offers, three above asking with high down payments. Our other offer was for $11,000 above asking with pre-approval for a higher amount. We still lost to an all-cash offer. Who ties up $750,000 all-cash in real estate? I was shocked. We went to another first open house and the property was already under agreement before the listing had even been marketed. They were just holding the open house for backup offers. Crazy.”
Some Redfin agents report that consumers are reluctant to sell a home for fear that they won’t be able to buy a better one. “I was very surprised at how few choices there are in our price range and how bad the houses looked,” said Maura Nicastle, a respondent in the Washington DC area. “I think for the next few years we are better off making do in our small home. I don’t want to pay more, only to have to start all over again refurbishing a place. Our house will sell fast so finding one is the much-bigger issue.”
Declining Demand for Distressed Sales
When asked what types of properties respondents wanted to buy, 57% indicated they were “very interested” in conventional sales, up from 48% last quarter. The data suggests to us that demand is broadening beyond the pure bargain-hunter.
Strong Interest in Renting Current Residence
Of the would-be buyers currently living in a home they owned, 59%reported wanting to rent that home compared to 41% who would sell it. These numbers were down from 67% and 33% in the first quarter, but still reflect a clear preference for renting rather than selling.
“The overwhelming sentiment among home-buyers is that there aren’t enough good homes for sale,” said Redfin CEO Glenn Kelman. “This makes sense: with rents rising and many analysts claiming we are at or near a bottom in home prices, who would sell now if he didn’t have to? Conventional sellers haven’t stepped in to replace the liquidity that once came from banks dumping lots of foreclosures. In our own business, we are seeing website traffic slowing due to lack of inventory even as activity levels remain high among the customers we have.”