After a hectic spring run-up in prices and a tense summer of bidding wars, buyers are feeling less confident about the market. This year’s refrains of scarce inventory and bidding wars are curbing the buyer enthusiasm we saw in our last survey. With the latest Redfin Real-Time Home-Buyer Tracker, updated with data for the third quarter of 2012, we’ll try to understand the changing motivations and expectations of today’s buyer.
Now that we have data from three quarterly surveys, we see some clear trends emerging.
Home buyers surveyed by Redfin…
- Believe that the market may be shifting against them: 46% of respondents believe now is a good time to buy, down two quarters in a row; in the first quarter it was 56%. Thirty-two percent believe now is a good time to sell, up two quarters in a row; in the first quarter it was 13%.
- Are more confident that home prices are on the rise: 61% believe prices will increase, up two quarters in a row; in the first quarter it was 32%.
- Increasingly prefer a conventional sale over a foreclosure or short sale: 62% of respondents were “very interested” in conventional sales, up from 57% in the second quarter and 48% in the first quarter, marking a return to normalcy after years of bargain-hunting;
- Are more likely to back off when faced with multiple offers: 31% said they would step back from a bidding war, compared to 28% in the second quarter, the first time we asked this question. Just 8% would do whatever it takes, compared to 10% a quarter earlier.
- Have growing concerns about the economy, despite rising home prices: 27% of respondents cited general economic weakness as a concern about buying this year, up from 24% in the second quarter and 20% in the first quarter.
Many buyers who emerged from hibernation this spring eager to take advantage of low rates and near-bottom prices now seem to have become demoralized by the intense competition for a limited selection of homes for sale; 71% of respondents reported encountering competition on at least one offer.
Despite these frustrations, buyers working with Redfin agents are willing to power through until they can find a home—at least as long as rates stay low. Referencing today’s ridiculously low rates, Redfin San Francisco Agent Landon Nash notes that he is working with “multiple buyers who continually mention ‘free money’ and are willing to pay up for the right property.” The sentiment that buyers are frustrated but still in the game is echoed by Redfin agents across the country.
About the Survey
For one week beginning last Thursday (August 16 to August 22, 2012), we surveyed 982 people who had toured a home with a Redfin agent since May 23, excluding anyone who did not indicate an intention to buy a home in the next twelve months, as well as anyone who responded to our first- or second-quarter buyer survey, or our third-quarter seller survey. Eight hundred and twenty-nine people responded across 19 metropolitan markets in the U.S.: Atlanta, Austin, Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, New York, Orange County, Philadelphia, Phoenix, Portland, Riverside / San Bernardino, Sacramento, San Diego, San Francisco, Seattle, and Washington DC.
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 Q3 2012 Redfin Real-Time Home-Buyer Survey
Among active home-buyers planning to buy in the next year, 50% of respondents reported either being under contract now or planning to buy in the next three months. This is down from 59% and 58% in the first and second quarter respectively, indicating a decreasing sense of urgency among buyers as we move into the second half of the year. This is likely largely seasonal, as homebuying activity typically declines in the second half of the year.
Shifting Toward a Seller’s Market
Forty-six percent of respondents indicated now is “a good time to buy a home,” compared to 56% in the first quarter and 48% in the second quarter:
Thirty-two percent said now is “a good time to sell a home,” up from 13% in the first quarter and 28% in the second quarter:
Although buyers increasingly believe that they no longer hold the upper hand, sellers disagree. According to the results of our seller survey just one week earlier, more sellers believe that now is a good time to buy. Sellers believe that today’s low prices (relative to the last five to six years) make it a good time to buy, but for buyers, the inventory at record lows make it a good time to sell.
For buyers and sellers both, the grass is greener on the other side of the fence. More sellers think it’s a good time to buy and more buyers think it’s a good time to sell.
More Than 60% of All Buyers Now Believe Prices Are Rising
Ten percent of respondents expect 2012 home prices in their area to “rise a lot,” essentially flat from 9% last quarter; 51% expect prices to “rise a little” compared to 49% last quarter. Twenty-six percent expect prices to “stay the same,” 9% expect prices to “drop a little,” and only 1% expect prices to “drop a lot.” The number of buyers who believe prices are rising continues to increase, though not as rapidly as it did between the first and second quarter.
Low Interest Rates Continue to Drive Demand
Low interest rates continue to dwarf all other reasons that buyers are planning to buy a home this year, with 64% of respondents selecting that reason, compared to 62% last quarter. The next-closest category was a life event, which was selected by just 39% of respondents.
Low Inventory Still an Issue, Concerns About Economy Grow
When asked about your “major concerns with buying a home this year,” the most common response was yet again “not enough good homes for sale” at 59%, down a hair from 60% the quarter prior. “General economic concerns” is the one category of concern that has consistently grown between each survey, growing from 20% in the first quarter to 24% in the second quarter to 27% this quarter. Unlike sellers, buyers are acting opportunistically, encouraged rather than discouraged by economic conditions.
Bidding Wars Not Slowing, More Buyers Backing Off
Multiple offers continue to be a major issue for buyers, with 71% of respondents indicating that they had encountered at least one multiple offer situation, the same number as the second quarter. Meanwhile, 31% of respondents said their reaction to a multiple offer situation would be to step back to avoid a “short-term bubble,” up from 28% in the second quarter. Just 8% would “do what it takes” to win the home, down from 10% in the second quarter.
More Buyers Just Want a Plain Vanilla Transaction
When asked what types of properties respondents wanted to buy, 62% indicated they were “very interested” in conventional sales, up from 57% in the second quarter and 48% in the first quarter. New construction also saw an uptick from 28% in the first and second quarter to 32% in the third quarter. More and more buyers would prefer to avoid the hassles of dealing with bank-owned homes or short sales.
“Even as prices have begun to rise, the overwhelming issue for most of today’s buyers is the selection of homes for sale, not what they cost,” said Redfin CEO Glenn Kelman. “The value-driven investors scooping up foreclosures for pennies on the dollar have largely been replaced by first-timers seeking to buy a pretty house now when mortgage rates are below 4%. With so few houses for sale, many will come up empty. The only home-owners willing to sell now mostly are the ones who have to, for a job in a new city or for a new baby. Low prices and low home-equity have resulted in a largely illiquid market for the past two years, and so — no matter how low mortgage rates get — sale volume will remain log-jammed until higher prices draw more move-up sellers into the market.”