The 2006 NAR Profile of Home Buyers and Sellers: Focus on Buyers

Posted November 28, 2006 by Paul C. Bishop and Harika Bickicioglu, NAR Research

There continues to be an increase in studies and surveys that prove how today's home buyers utilize the internet to find their homes. In particular, it's interesting to note how the internet has increased in use as a search tool.

Once again, it's very clear, and can't be stressed enough how important having a quality website that is search engine optimized is for a real estate professional. I highlighted, in blue, some interesting points in the article.

The 2006 NAR Profile of Home Buyers and Sellers: Focus on Buyers

Home buyers and sellers rely on real estate professionals to assist them in many aspects of the home sales transaction. From the initial search to closing, real estate agents and brokers help guide home buyers through the many steps that culminate in a successful home purchase.

Real estate professionals also help home sellers by developing market plans, pricing homes competitively and utilizing their experience to assist sellers through each step of the process.

The National Association of REALTORS® annually surveys home buyers and sellers to gather detailed information on the home buying and selling process.* The survey results provide REALTORS® with insights into the characteristics and needs of their clients. It also helps them to improve client services. Others can also benefit from the findings through a better understanding of the housing market and how the unique role of real estate professionals continues to evolve. The latest survey results were recently released and published in the 2006 NAR Profile of Home Buyers and Sellers. Below are highlights from the report that focus on home buyers.

Characteristics of Home Buyers
Who are today’s home buyers? The demographic characteristics of home buyers can provide insight into how the demand for housing will evolve over time. Smaller households (those with fewer young children) and aging baby-boomers approaching retirement will influence the type of homes those households purchase. In addition, healthy levels of legal immigration will contribute to household formation, fueling housing demand.

· The typical home buyer was 41 years old. As in previous surveys, first-time buyers tended to be younger than repeat buyers. Among first-time buyers, the median age was 32; for repeat buyers, the median age was 47. The largest percentage of all home buyers – 30 percent – were between 25 and 34 years old.

· The majority of home buyers – 62 percent – were in households where there were no children under 18 years old residing in the home. Fewer than one in five buyers had one child under 18 years old who still lived at home.

· Home buyers tended to have a larger income than did the population in general. The 2005 median household income for buyers was $71,800. As a comparison, the Census Bureau reports that the median income for all households was $46,326 in 2005 (latest data available).

· First-time home buyers accounted for 36 percent of homes purchased – the first decrease in the share of first-time home buyers since 2001. First-time homebuyers had a lower median household income – $58,300 – than did repeat buyers ($81,900). That is not surprising since first-time buyers are generally younger than repeat buyers.

What They Buy
Buyers purchase homes in different areas – suburban or city – and of different types and at different prices. As in previous surveys, existing homes accounted for the majority of homes sold during the survey period, but new homes were also popular.

· One in five homes purchased by recent buyers was newly built.

· Similar to results in the previous survey, three out of four homes purchased in 2005 were detached single-family homes.

· The typical home buyer purchased a home 13 miles from their previous residence in a suburb or subdivision.

· The median price of a home purchased by the typical buyer was $214,000. First-time buyers generally purchased less expensive homes – $165,000 – than did repeat buyers – $249,000.This is not surprising since repeat buyers tend to have higher incomes and can use the equity from their previous home toward their next purchase.

Why They Buy
People buy homes for many reasons: as an investment, for more space, to be closer to schools, relatives, or their work. But the reasons for purchasing a home can differ for first-time buyers and repeat buyers.

· The most frequently cited reason for purchasing a home – whether a first-time or repeat purchase – was the desire to own a home of one’s own. As might be expected, this was most important for first-time buyers (74 percent).

· The desire for more living space was the cited as the primary reason for a housing change by 20 percent of repeat buyers, but 16 percent of them purchased another home due to a job relocation or move.

· Other reasons for a home purchase include retirement, change in family situation and desire for less space.

Finding a Home
Home buyers can turn to many information sources when searching for a home to purchase. Real estate agents and the Internet are the two most popular sources of information cited in the latest survey. Yard signs, open houses and newspapers are also frequently cited as information sources.

The Internet, in particular, has continued to increase in popularity among home buyers as a search tool. Eighty percent of buyers used the Internet as an information source. Almost
one fourth – 24 percent – of all buyers first found the home they eventually purchased on the Internet.

There were differences in the type of information used between first-time and repeat buyers. First-time home buyers were more likely to cite the Internet as a home search tool than were repeat buyers (83 percent vs. 78 percent). Repeat buyers used a home builder as an information source more often than did first-time buyers (30 percent vs. 19 percent).

The Use of Real Estate Professionals
In spite of the continued rise of the Internet as a home search tool, real estate professionals are still the number one source of information about homes for sale. In fact, 87 percent of Internet searchers also used a real estate agent as a source of information, and 35 percent of them found the home they ultimately purchased through a real estate agent.

Use of the Internet has not diminished the role of real estate professionals in the home purchase process. More than three quarters – 77 percent – of home buyers purchased their home through a real estate agent. Interestingly, even those home buyers who used the Internet to search for a home were more likely to use a real estate agent in the home
purchase transaction.

What Buyers Look for in Their Real Estate Professional
Home buyers rely on the experience and professionalism of their real estate agents. The two most important factors in choosing an agent are the agent’s honesty and trustworthiness and her reputation. That honesty and repute can result in additional
business. Almost half of first-time buyers found their real estate agent through a referral from a friend, neighbor or relative (or knew the agent themselves). Over one third of repeat buyers (35%) also relied on referrals for an agent, but 19 percent of them also relied on their previous experience with an agent. Regardless of how they found their real estate professional, what buyers most wanted from their agent was help finding the right home to purchase. Interestingly, this factor was more important for repeat buyers than first-time buyers; first-time buyers more often wanted guidance in determining how much home they could afford.

Conclusion
The professionalism, responsiveness, knowledge and efficiency that real estate professionals bring to their home-buyer clients pays off in repeat business. The 2006 NAR Profile of Home Buyers and Sellers** shows that two thirds of agent-assisted buyers would definitely use their same agent again or recommend that agent to others.

Many of the home buyers surveyed for this report will use their agents to help them sell a home in the future. Next month in this column, we will take a brief look at the profile of home sellers based on the results of the 2006 survey – their characteristics and those of their homes, FSBOs, and the role of real estate professionals.

*These surveys provide information on demographics, housing characteristics and the experience of buyers and sellers in the housing market. Buyers and sellers also share information on the role of real estate professionals in their home sales transactions. The 2006 survey results are representative of home purchases between July 2005 and June 2006. Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records. Information about sellers comes from those buyers who also sold a home.

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