2009 Profile of Home Buyers and Sellers Cleveland, OH Report

The real estate market offers a variety of choices, opportunities and challenges for home buyers, sellers, and real estate professionals helping them with their transactions. For home buyers, there are numerous ways to search for and find a home, a variety of mortgage products to finance their home and a growing list of services that their agent can provide to assist them in the process. Because the real estate market is always evolving, it is important for real estate professionals and the public to have a clear picture of today’s home buyers and sellers. The 2009 Profile of Home Buyers and Sellers describes the characteristics and motivations of recent home buyers and sellers in Cleveland, OH and in so doing helps real estate professionals track the changing demands of consumers in a dynamic Ohio market.

Characteristics of Home Buyers

• Fifty percent of recent home buyers were first-time buyers, compared to 47 percent nationwide.
• The typical first-time home buyer was 30 years old, while the typical repeat buyer was 47 years old, nationwide first-time buyers were typically 30 and repeat buyers were typically 48 years old.
• The 2008 median household income of buyers was $72,100 this is just slightly lower than the median income of buyers nationwide, which was $73,100.
• The median income was $57,500 among first-time buyers and $91,400 among repeat buyers.
• Nineteen percent of recent home buyers were single females, and 12 percent were single males.
• Nationwide, 21percent of recent home buyers were single females, and 10 percent were single males.
• For 32 percent of recent home buyers, the primary reason for the recent home purchase was a desire to own a home.

Characteristics of Homes Purchased

• New home purchases were at the lowest level in eight years nationwide—down to 18 percent of all recent home purchases. This is reflective in Cleveland, OH—11 percent of homes were new.
• The typical home purchased was 1,800 square feet in size and was built in 1961.
• Ninety-one percent of home buyers purchased a detached single-family home.
• The median price of home purchased was $152,828 compared to $185,000 nationwide.
• When considering the purchase of a home, commuting costs were considered very or somewhat important by 78 percent of buyers.

NOTES

In July 2009, the NATIONAL ASSOCIATION OF REALTORS® mailed an eight-page questionnaire to 120,038 consumers who purchased a home between July 2008 and June 2009. The survey yielded 9,138 usable responses with a response rate, after adjusting for undeliverable addresses, of 7.9 percent. There were 233 unweighted responses from Cleveland, OH, yielding a response rate of 6.7 percent, which form the basis for this report. 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.

All information in this Profile is characteristic of the 12-month period ending June 2009, with the exception of income data, which are reported for 2008. In some sections comparisons are also given for results obtained in previous surveys. Not all results are directly comparable due to changes in questionnaire design and sample size. Some results are presented for the four U.S. Census regions: Northeast, Midwest, South and West. The median is the primary statistical measure used throughout this report. Due to rounding and omissions for space, percentage distributions may not add to 100 percent.

Buying or selling a home is a complex and, at times, daunting process. There are many options as well as constraints that households face when searching for the right home that will meet their needs today as well as in the future. For home sellers, the transition from one home to another often is driven by significant life events such as a job relocation or retirement. Recently, the unsettled economy has added another layer of uncertainty as both would-be buyers and sellers consider when, and even if, they should complete a real estate transaction.

A majority of home buyers and sellers rely on the services and expertise of real estate professionals to assist them with their transaction. In turbulent times, buyers and sellers appreciate the knowledge and expertise of real estate professionals who can guide them through each step of the transaction. One indicator of client satisfaction is that a majority of both buyers and sellers report that they would use the same real estate agent again or recommend that agent to others. The NATIONAL ASSOCIATION OF REALTORS® surveys home buyers and sellers annually to gather detailed information about the home buying and selling process. These surveys provide information on demographics, housing characteristics and the experience of consumers in the housing market. Buyers and sellers also share information on the role that real estate professionals play in home sales transactions.

This report provides real estate professionals with insights into the needs and expectations of their clients. What do consumers want when choosing a real estate professional? How do home buyers begin the process of searching for a home? Why do some sellers choose to forego the assistance of an agent? The answers to these questions, along with other findings in this report, will help real estate professionals better understand the housing market and also provide the information necessary to address the needs of America’s real estate consumers.

THE NATIONAL HOUSING ENVIRONMENT
Although evidence is accumulating that the economy is emerging from the Great Recession, there are a number of headwinds that may make the nascent recovery slower and more tentative than previous business cycle expansions. Significant job loss is one of the most tangible effects of the recession. Most sectors, with the possible exception of healthcare, have recorded significant decreases in employment. Even under the most optimistic expectations, it will take several years to reabsorb the unemployed and reduce the unemployment rate toward a level consistent with full employment.

The second long-lasting characteristic of the recession is the loss of trillions of dollars of household wealth since 2005. Households experienced falling home equity and sharply reduced financial asset values as stock markets worldwide posted some of the steepest declines in memory. For many households, the equity held in their home is the largest component of their wealth. Recently released data from the Federal Reserve shows that homeowners’ equity relative to the value of their homes is near all-time lows. Downward pressure on home prices as well as extraction of equity through second mortgages and lines of credit has reduced the equity stake that households in the aggregate have in their homes. Unlike job loss, which directly affects a fraction of all households, the loss of wealth is broadly felt.

Evidence is emerging that households are working to strengthen their balance sheets by paying down debt and saving a greater portion of their paycheck. The national savings rate has increased from virtually zero to the high single-digits. Some experts speculate that the long-term impact will be slower growth as cautious consumers spend more carefully and rely less on credit.

It is within this environment that tentative signs of stabilization are emerging in the housing market. In most areas of the country, home prices remain well below peak levels recorded in late 2005 and early 2006. However, unit sales have risen in some of the areas that have experienced the steepest decline in prices. Inventories of homes for sale have been pared to manageable levels. Housing affordability is at record levels, which has drawn cautious home buyers and investors into the market. Also contributing to the increase in home sales has been a tax credit available to first-time buyers. In fact, as detailed in this Profile, the share of first-time home buyers, typically around 40 percent of sales, rose to 47 percent during the period from mid-2008 through mid-2009.

Challenges remain, however. Consumers remain understandably cautious about the economy and their personal financial situation. While mortgage rates remain at very favorable levels, some home buyers find that securing a mortgage is both more time consuming and more difficult. In fact, one in ten recent home buyers reported that obtaining a mortgage was more difficult than expected.

Perhaps as important for the long-term resilience of the housing market, home ownership is still a goal that many aspire to achieve. For example, 62 percent of first-time buyers reported that the primary reason that they purchased a home was the desire to be a homeowner. Other benefits of ownership, while important, ranked lower for most first-time buyers. The dream of homeownership remains alive and well.

Contact our RE/MAX team of Realtors if you have questions or need to discuss home buying, selling or relocation in the Cleveland, Ohio area and surrounding counties.