Low inventory, rising home prices and higher interest rates are making it more difficult, but they aren’t keeping some people from closing on a home, according to the results of a survey released Tuesday.
In fact, 34 percent of those who purchased a home were unfazed by price and rate hikes, 51 percent didn’t pay above asking, and 42 percent only made one or two offers.
The typical profile of a successful buyer in the first half of 2018 is someone who was in the market for six months or less (61 percent), made four or fewer offers (72 percent), and bought a three-bedroom, two-bath home, according to realtor.com, The Home of Home Search.
Those who had the easiest time buying a home were older buyers, above the age of 55 years old, according to the survey conducted earlier this month by Harris Research, which includes online responses from more than 1,000 people who closed in 2018.
“Successful homebuyers in 2018 have been exceptionally well-qualified,” said Danielle Hale, chief economist for realtor.com.
“We are seeing the impact of the inventory crisis in the data, and it’s holding back home sales.
“While would-be buyers struggle with limited inventory, rising prices and mortgage rates, those who closed were undeterred by today’s buyer frenzy. This is likely attributed to their experience, cash and perhaps the market they’ve chosen to buy in.”
Rising rates and prices impacted most buyers
Home prices set new records this spring. Two-thirds of closers revealed their search was impacted by rising prices or rates.
In fact, 22 percent indicated increased costs forced them to look for a less expensive home.
Nineteen percent said they had to increase their monthly mortgage budget and the same share said they had to look in a different neighborhood.
Conversely, 34 percent of those who closed indicated that rising prices and mortgage rates had no impact on their purchase.
Fifty-four percent of buyers above 55 years of age indicated no impact, while 31 percent of buyers between the ages of 35 and 54 years old, and 23 percent of those 18-34 years old, also said it had no impact.
Most closers didn’t pay above asking, put down more than 20 percent
Despite this market’s notorious bidding wars, the majority of successful home buyers, 51 percent, didn’t have to pay more than asking price. In fact, 28 percent of buyers paid less than asking price and 23 percent paid full asking. This also varied by age — only 24 percent of those over 55 years old paid over asking, compared to 59 percent of those 18-34 years old and 56 percent of those 35-54 years old.
Although the majority didn’t offer above asking, these successful buyers enticed sellers with cash. Mortgage data from the first half of 2018 shows more than 30 percent of buyers put more than 20 percent down.
This data also shows that larger down payments are more common among older buyers, with 22 percent of those aged 18-34, 32 percent of those aged 35-54, and 51 percent of those aged 55 and older putting more than 20 percent down.
Fast closings with limited offers
A large share of those who bought in 2018 closed very quickly. In fact, 25 percent of respondents started their search and closed within two months. More than 60 percent closed within six months and only 8 percent took one year or more after starting their search.
Older buyers were more likely to close quickly, with 34 percent of those 55-plus closing within two months, compared to 23 percent of 35-54 year olds and 21 percent of 25-34 year olds.
Additionally, nearly half of all buyers, 42 percent, were able close on a home after one to two offers.
Fifty-eight percent had to make three or more offers. Again, older buyers came out on top with 64 percent of those 55-plus making only one or two offers, compared to 38 percent of those 35-54 years old and 30 percent of 18-34-year-olds.
Additionally, one third of 18-54 year-olds had to make five or more offers. When buyers were asked about the most effective tactic they used to get ahead, the No. 1 strategy cited was checking listings websites every day, indicated by 30 percent.
Twenty-four percent reported putting more than 20 percent down and the same share reported using all cash, followed by 20 percent of respondents who used each of the following tactics: set a price alert, offered above asking, and used a larger earnest money deposit.
M. Dean Vincent is the 2018 chairman of the Santa Clarita Valley Division of the 10,300-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty-related professionals.