1

REALTORS® CONFIDENCE INDEX SURVEY Report on the March 2017 Survey

The REALTORS® Confidence Index (RCI) report provides monthly information about real estate market conditions and expectations, buyer/seller traffic, price trends, buyers’ characteristics, and issues affecting real estate transactions based on a monthly survey of REALTORS®.

The March 2017 report is based on the responses of 2,703 REALTORS®, 1,484 of which closed a sale.1 Respondents reported on local market conditions experienced in March and the characteristics of their most recent sale for the month. The National Association of REALTORS® (NAR) collects the data from a random sample of REALTORS® and the data is viewed to be representative of the sales for the month. NAR conducted the online survey from April 1–10, 2017. To correct for over- or under- response at the state level, NAR weights the responses by a factor that aligns the sample distribution of responses to the distribution of NAR membership. All real estate is local: conditions in specific markets vary from the overall national trends presented in this report. REALTORS® may be interested in comparing their markets against the national summary.

The RCI report is an output of the Research Division of the NATIONAL ASSOCIATION of REALTORS®.2 For questions or information about this report, please email dhale@realtors.org. Lawrence Yun, Senior Vice President and Chief Economist Danielle Hale, Managing Director, Housing Research Gay Cororaton, Research Economist Meredith Dunn, Research Communications Manager

Research Division NATIONAL ASSOCIATION of REALTORS® 500 New Jersey Avenue, NW Washington, DC 20001 202.383.1000

1 The survey is sent to 50,000 REALTORS® who are selected through simple random sampling. To increase the response rate, the survey is also sent to respondents in the previous three surveys who provided their email addresses. The number of responses to a specific question varies because the question may not be applicable to the respondent or because of non-response. To encourage survey participation, ten REALTORS® are randomly selected to receive a gift card. 2 The team acknowledges Jessica Lautz, Managing Director, Survey Research and Communications, Meredith Dunn, Research Communications Manager, Amanda Riggs, Research Survey Analyst, and Brandi Snowden, Research Survey Analyst, for their inputs in improving the survey and in editing and disseminating the report. Acknowledgement also goes to Lisa Herceg, Director, Marketing Research, who sends out the survey to members.

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Table of Contents

Summary ................................................................................................................................................... 3

I. Market Conditions .............................................................................................................................. 4

REALTORS® Reported Strong Buyer Traffic and Tight Supply ............................................................ 4

REALTORS® Are Generally Optimistic Over the Next Six Months ...................................................... 7

Most REALTORS® Reported Constant or Higher Prices Compared to One Year Ago ......................... 9

REALTORS® Expect Sustained Price Growth in the Next 12 Months................................................. 10

Properties Typically on the Market for 34 Days .................................................................................... 13

II. Buyer and Seller Characteristics ........................................................................................................ 17

Sales to First-Time Buyers: 32 Percent of Sales .................................................................................... 17

Distressed Sales: Six Percent of Sales .................................................................................................... 19

Sales for Investment Purposes: 15 Percent of Sales ............................................................................... 20

Cash Sales: 23 Percent of Sales .............................................................................................................. 21

Fewer First-time Buyers Are Making a Low Downpayment ................................................................. 21

III. Issues Affecting Transactions ........................................................................................................... 23

Contract Settlement: Financing, Home Inspection, and Appraisals Are Major Issues ........................... 23

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Summary

While local conditions vary, the REALTORS® Buyer Traffic Index and the REALTORS® Confidence Index—Current Conditions for single-family homes, townhomes, and condominiums remained above 50 in March 2017, indicating that more respondents reported “strong” than “weak” conditions. Both indices were higher than their levels one year ago and in the previous month.3 The REALTORS® Seller Traffic Index decreased from its level one year ago, but it increased from its level in the previous month. It has remained below 50 since February 2008, indicating that seller activity is still “weak.”

First-time homebuyers accounted for 32 percent of sales.4 Amid sustained job creation, the share of first-time homebuyers has been on a modest rise, up from 29 percent in 2014. With fewer new foreclosures, distressed properties accounted for six percent of sales, purchases for investment purposes made up 15 percent of sales, and cash sales accounted for 23 percent of sales. Amid tight supply, half of properties that sold in March 2017 were on the market for 34 days or less compared to 47 days in March 2016.

Lack of homes for sale was the main issue reported by REALTORS®. Respondents reported a mixed effect from the uptick in mortgage rates since November 2016; some buyers are encouraged to act quickly while others are discouraged by diminished affordability. With the coming of spring and summer, more respondents expect the outlook to be “strong” than “weak” in the next six months compared to current conditions. The six-month outlook confidence indices for the single-family home, townhome, and condominium markets each registered above 50, with the indices all higher compared to their levels one year ago.

March 2017 REALTORS® Confidence Index Survey Highlights Mar-17 Feb-17 Mar-16

RCI Buyer Traffic Index 74 70 69

RCI Seller Traffic Index 43 41 45

RCI Current Conditions: Single-Family Sales 74 69 69

RCI Six-Month Outlook: Single-Family Sales 81 80 77

First-Time Home Buyers, as Percent of Sales 32 32 30

Sales to Investors, as Percent of Sales 15 17 14

Cash Sales, as Percent of Sales 23 27 25

Distressed Sales, as Percent of Sales 6 7 8

Median Days on Market 34 45 47

Sold at Original List Price or Premium, as Percent of Sales 42 36 38

Median Expected Price Growth in Next 12 Months (%) 4.0 3.8 3.7

3 An index greater than 50 indicates the number of respondents who reported “strong” (index=100) outnumbered those who reported “weak” (index=0). An index equal to 50 indicates an equal number of respondents reporting “strong” and “weak” market conditions. The index is not adjusted for seasonality effects. 4 NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 35 percent were first-time home buyers, up from 32 percent in 2015. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.

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I. Market Conditions

REALTORS® Reported Strong Buyer Traffic and Tight Supply

The REALTORS® Buyer Traffic Index registered at 74 in March 2017 (70 in February 2017; 69 in March 2016), indicating that more respondents viewed buyer traffic conditions as “strong” rather than “weak.”5 Homebuying demand is likely being bolstered by sustained job growth, with 2.2 million jobs added in the last 12 months and 16 million jobs generated since February 2010.6 The unemployment rate fell to 4.5 percent in March 2017, the lowest rate since the economic recovery from the 2008-2009 recession. Future interest rate increases may also be prompting first-time homebuyers to take advantage of the current mortgage rates. In the week of April 6, the 30-year fixed mortgage rate averaged 4.1 percent, and rates have held above four percent since the week of November 24, 2016.7 Mortgage rates are likely to continue to rise modestly to an average of 4.4 percent in 2017 and 5.0 percent in 2018.8 The REALTORS® Seller Traffic Index registered at 43 in March 2017 (41 in February 2017; 45 in March 2016), indicating that more respondents viewed seller traffic conditions as “weak” rather than “strong.” Supply conditions have remained largely tight in many areas, with the index registering below 50 since February 2008.

5The REALTORS® Buyer Traffic Index provides information on the level of homebuying demand or interest, which may materialize as a contract to purchase or closed sale after two or three months. 6 The last 12 months refers to February 2016 to February 2017. Nearly 8.7 million jobs were lost from February 2008–February 2010, so the gain above previous peak employment is 7.4 million jobs. 7 Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac. 8 NAR forecast. See https://www.nar.realtor/sites/default/files/reports/2017/embargoes/forecast-03-2017-us-economic-outlook-03-29-2017.pdf.

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REALTORS® Buyer and Seller Traffic Indexes as of March 2017

Buyer Traffic Index Seller Traffic Index

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Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that buyer traffic conditions can be characterized as “moderate” to “very strong” in many states except in Wyoming where buyer traffic conditions were “weak.”9

The REALTORS® Seller Traffic Index indicates seller traffic conditions were “very weak” to “weak” in most states, but conditions were “moderate” to “strong” in 15 states, which includes oil-producing states that have been impacted by the collapse in oil prices since the middle of 2014.10 Respondents reported that demand is strong, but supply is lacking, especially homes that are affordable to buyers. This is consistent with available data on the affordability of active housing inventory.11

9 To increase the number of observations for each state, NAR computes the index based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. The survey asks, “How do you rate the past month's buyer/seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” NAR compiles the responses into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states. 10 While the price of oil has picked up in the last year, the March 2017 price was roughly half the price that prevailed in Summer 2014 before the collapse, so oil-dependent economies may see some improvement, but generally remain at a low level. 11 See for example: https://www.nar.realtor/news-releases/2017/02/nar-realtorcom-identify-growing-rift-between-housing-availability-and-affordability and https://www.nar.realtor/topics/realtors-affordability-distribution-curve-and-score

6

Employment conditions affect the supply and demand for housing. Nationally, employment rose 1.6 percent in February 2017 compared to February 2016. Employment growth was strongest in Idaho, Nevada, and Utah. In these states, buyer traffic was “strong” to “very strong”. Non-farm employment contracted in the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, and Mississippi, as well as in West Virginia.12 The chart below shows the share of oil production to the state’s economy. In some of these states, the job cutbacks have led to “moderate” seller traffic conditions, based on the REALTORS® Seller Traffic Index. Texas, which has a more diversified economy, has been more resilient than other oil-producing states, with employment growing slightly above the national average.

12 Source: U.S. Department of Energy. See https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm.

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REALTORS® Are Generally Optimistic Over the Next Six Months With spring and summer rolling in, the REALTORS® Confidence Index—Six-Month Outlook for single-family homes, townhomes, and condominiums each registered above 50, indicating that more REALTOR® respondents expected market conditions to be “strong” than “weak” over the next six months compared to current conditions.13

The index for condominiums was at 61 in March 2017 (61 in February 2017; 55 in March 2016), the highest level since this index was generated in 2008. The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016,” appears to be bolstering homebuying in the 13 The survey asks, “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses into a diffusion index. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.

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Major Oil Producers Based on Share of State's Oil Production to State GDP

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REALTORS® Confidence Index—Six-Month Outlookas of March 2017

Single-family Townhome Condominium

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condominium market.14 Among other measures, the law eases access to FHA condominium financing by reducing the FHA condominium owner occupancy ratio from 50 to 35 percent, directing the FHA to streamline the condominium re-certification process, and providing more flexibility for mixed-use buildings.

In the single-family homes market, the outlook in the next six months compared to current conditions is “strong” to “very strong” in nearly all states and “moderate” in Delaware and the District of Columbia.15 In the townhomes market, the outlook is “moderate” to “very strong”, except in Wyoming, New Mexico, and Mississippi. Respondents expect the townhomes market to be “very strong” in Washington, Oregon, Utah, and Colorado. In the market for condominiums, the outlook is “moderate” to “very strong” in many states, except in eight states and the District of Columbia.16 Respondents expect markets to be “very strong” in Utah and Colorado.

14The bill, which was championed by NAR, passed the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016 and was signed by President Obama on July 29, 2016. See http://www.realtor.org/articles/president-obama-signs-hr-3700 15 To increase the number of observations for each state, the index is based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” NAR compiles the responses into a diffusion index. A diffusion index greater than 50 means that more respondents rated conditions as “Strong” than “Weak.” For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states. 16 See for example this review: http://economistsoutlook.blogs.realtor.org/2016/10/05/do-elections-affect-the-housing-market-in-washington-dc/

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Most REALTORS® Reported Constant or Higher Prices Compared to One Year Ago With the low level of inventory of homes for sale in many areas coupled with strong buyer traffic in most areas, 88 percent of respondents reported constant or higher home prices in March 2017 compared to one year ago (90 percent in February 2017; 90 percent in March 2016).17

17 The survey asks, “Considering your average home transaction from the past year, at what average price would the very same home be sold today?”

10

Because conditions are competitive for buyers, offers continue to be high relative to asking price; 42 percent of properties sold at or above the original listing price (36 percent in February 2017; 38 percent in March 2016). When this survey first gathered this information in March 2012, only 28 percent of properties sold at or above the original list price. Because this measure tends to rise in the spring and summer, we expect the share of properties sold at or above listing price to increase in the months ahead.

REALTORS® Expect Sustained Price Growth in the Next 12 Months

Among REALTORS® who responded to the March 2017 survey, the median expected home price change in the next 12 months was four percent (3.8 percent in February 2017; 3.7 percent in March 2016). 18 Lack of supply amid strong demand has propped up home prices. The map below shows the median expected price change of the respondents in the next 12 months at the state level.19 Thirteen states, led by Washington, Colorado, and Utah, had median expected price growth in the range of four to seven percent. The oil-producing states of Alaska and North Dakota have the lowest median expected price change; respondents expect a decline in Alaska home prices and growth of two percent in North Dakota in the next 12 months.

18 The median expected price change is a measure that represents the middle value of the distribution of responses. 19 To increase the number of observations for each state, NAR uses data from the last three surveys.

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Percent of Properties Sold at Original Price or at Net Premium from the Listing Price as of March 2017

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Looking at the values over time in selected states, the median expected price change appears to be increasing again, indicating that respondents expect demand to remain strong, even as home prices continue to rise.20 In many states, the expected price change in the next 12 months is higher than the expected price change one year ago.

20 The selected states shown in these charts are those with approximately 150 observations.

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REALTORS® Median Expected Price Change Over the Next 12 Months in Selected West States

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REALTORS® Median Expected Price Change Over the Next 12 Months in Selected Midwest States

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REALTORS® Median Expected Price Change Over the Next 12 Months in Selected South States

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Properties Typically on the Market for 34 Days Properties stayed on the market for fewer days in March 2017 compared to one year ago, amid strong demand and tight supply. Nationally, properties sold in March 2017 were typically on the market for 34 days (45 days in February 2017; 47 days in March 2016).21 The length of time properties are on the market has fallen as demand has outpaced the inventory of homes for sale. In 2011, properties were typically on the market for 97 days.

21The survey asks, “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market.

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REALTORS® Median Expected Price Change Over the Next 12 Months in Selected Northeast States

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Median Days on Market of Sales Reported byREALTOR® Respondents as of March 2017

All Foreclosed Short sale Non-distressed

All: 34 Foreclosed: 52 Short sale: 90 Non-distressed: 32

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Nationally, 48 percent of properties that sold in March 2017 were on the market for less than a month (42 percent in February 2017; 42 percent in March 2016).22 Only 11 percent of properties were on the market for six months or longer (10 percent in February 2017; 13 percent in March 2016).

The chart below shows the median days on market by state.23 Properties that sold in January–March 2017 were typically on the market for less than 31 days in 12 states and in the District of Columbia. Looking at the values over the last few years, in most states the median length of time that properties stay on the market has trended downwards, though the graphs also show that days on market in some states fluctuates seasonally.24

22 Days on market usually refers to the time from listing date to contract date. 23 In generating the median days on market at the state level, NAR uses data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. 24To increase the number of observations for each state, NAR uses data from the last three surveys. The selected states shown in these charts are those with approximately 150 observations.

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Percentage Distribution of Time on Market of Sales Reported by REALTOR® Respondents as of March 2017

(In Months)

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Median Days on Market of Sales Reported by REALTORS® in Selected West States

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Median Days on Market of Sales Reported by REALTORS® in Selected Midwest States

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Median Days on Market of Sales Reported by REALTORS® in Selected South States

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Median Days on Market of Sales Reported by REALTORS® in Selected Northeast States

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17

II. Buyer and Seller Characteristics Sales to First-Time Buyers: 32 Percent of Sales

Sales to first-time homebuyers accounted for 32 percent of residential sales in March 2017 (32 percent in February 2017; 30 percent in March 2016). Sustained job and income growth are likely supporting the increasing purchases from first-time homebuyers. The anticipation of further increases in interest rates may also have prompted first-time buyers to enter the market.25 The aging of the Millennial generation may also be underpinning the continued, albeit modest, increase in homebuying by first-time buyers. The chart below shows the population most likely to be first-time home buyers—those aged 25 to 34—is projected to continue to increase through 2024 at which point many Millennials will have aged out of this age group. The population in the 25 to 34 years old group will remain stable as the Gen Z cohort moves into this age group, and this cohort is likely to become the largest homebuyer age group as Millennial buyers get older.26

25 Mortgage rates in this report refer to the average contract rates on 30-year conventional mortgages reported by Freddie Mac. The average 30-year mortgage rate was 3.54 percent in the week of November 3, 2016. It broke above four percent, to 4.03 percent, in the week of November 24, and it climbed to 4.32 percent in the week of February 29. Since that time, rates have eased somewhat. The average rate stood at 4.1 percent in the week of April 6, 2017. 26 The U.S. Census Bureau identifies Millennials as those born from 1982 to 2000. The Gen Z group are those born after 2000.

32%

0%

10%

20%

30%

40%

50%

60%

2008

1020

0902

2009

0620

0910

2010

0220

1006

2010

1020

1102

2011

0620

1110

2012

0220

1206

2012

1020

1302

2013

0620

1310

2014

0220

1406

2014

1020

1502

2015

0620

1510

2016

0220

1606

2016

1020

1702

First-time Buyers as Percent of Residential Market as of March 2017

18

Buyers 34 years old and under, who are likely to be first-time buyers, accounted for 31 percent of residential buyers in March 2017 (29 percent in February 2017; 27 percent in March 2016). The share of buyers 34 years and under appears to be on a gradual uptrend from the 26 percent share in July 2013 when this information was first collected in the survey.27

Homebuyers who were renting prior to their recent home purchase accounted for 43 percent of sales in March 2017 (42 percent in February 2017; 39 percent in March 2016). The fraction of buyers who were renting prior to their recent home purchase has increased from the 36 percent share in February 2014

27 NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 28 percent were 18-34 years old. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes.

39.8

47.650.9

30

35

40

45

50

55

2000

2003

2006

2009

2012

2015

2018

2021

2024

2027

2030

2033

2036

2039

2042

2045

2048

2051

2054

2057

2060

Mill

ions

Population Age 25-34 Years Old

Source: U.S. Census Bureau Population Projections

26% 31%

52%

49%

22%21%

0%

10%

20%

30%

40%

50%

60%

2013

07

2013

11

2014

07

2014

09

2014

11

2015

01

2015

03

2015

05

2015

07

2015

09

2015

11

2016

01

2016

03

2016

05

2016

07

2016

09

2016

11

2017

01

2017

03

Age Distribution of Buyers for Sales Reported byREALTOR® Respondents as of March 2017

Age 34 and under Age 35 to 55 Age 56 and over

19

when this information was first collected.28 At the same time, the share of buyers who were living in their own home at the time of their recent home purchase has decreased.

Distressed Sales: Six Percent of Sales Distressed sales accounted for six percent of sales in March 2017 (seven percent in February 2017; eight percent in March 2016). Foreclosed properties were five percent of residential sales, while short sales were only one percent of residential sales.29 With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for about a third to half of sales until 2012 when they began to fall below this level.

28 NAR’s 2016 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 41 percent rented an apartment or house prior to their home purchase. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS® and captures purchases for investment purposes and vacation/second homes. 29 The survey asks respondents who had a sale in the month to report on the characteristics of the most recent sale closed.

36% 43%

55%

48%

9%9%

0%10%20%30%40%50%60%

2014

08

2014

10

2014

12

2015

02

2015

04

2015

06

2015

08

2015

10

2015

12

2016

02

2016

04

2016

06

2016

08

2016

10

2016

12

2017

02

Living Status of Homebuyers at Time of Home Purchase as of March 2017

Rents an apartment or house

Lives in own home

Lives with parents, relatives, or friends

20

Sales for Investment Purposes: 15 Percent of Sales Investment sales made up 15 percent of sales in March 2017 (17 percent in February 2017; 14 percent in March 2016).30 Purchases for investment purposes have generally been on the decline since 2011–2012 when investment sales accounted for 20 percent of sales. Purchasing for investment has become less attractive with fewer distressed sales on the market and with home prices rising, but a seasonal pick-up in the share of investment purchases can often be seen from November to March.

30 The 2016 NAR Investment and Vacation Homes Survey reports that among home buyers, 19 percent purchased the property for investment purposes, to rent out or for asset diversification.

0%

10%

20%

30%

40%

50%

60%

2008

1020

0902

2009

0620

0910

2010

0220

1006

2010

1020

1102

2011

0620

1110

2012

0220

1206

2012

1020

1302

2013

0620

1310

2014

0220

1406

2014

1020

1502

2015

0620

1510

2016

0220

1606

2016

1020

1702

Distressed Sales as Percent of Residential Salesas of March 2017

Foreclosed Short sale

Foreclosed: 5% Short sale: 1%

15%

0%

5%

10%

15%

20%

25%

30%

2008

1020

0902

2009

0620

0910

2010

0220

1006

2010

1020

1102

2011

0620

1110

2012

0220

1206

2012

1020

1302

2013

0620

1310

2014

0220

1406

2014

1020

1502

2015

0620

1510

2016

0220

1606

2016

1020

1702

Sales for Investment Purpose as Percent of Residential Sales as of March 2017

21

Cash Sales: 23 Percent of Sales In March 2017, 23 percent of sales were cash sales (27 percent in February 2017; 25 percent in March 2016). Buyers of homes for investment purposes, distressed sales, second homes, and foreign clients are more likely to pay cash than first-time home buyers. As the shares of investment and distressed sales have declined, so has the share of cash sales.

Fewer First-time Buyers Are Making a Low Downpayment

Among first-time homebuyers, 63 percent put down a zero to six percent downpayment, a decrease from the 74 percent share in June 2009 when NAR started collecting this information in the RCI Survey. The Federal Housing Administration (FHA) and the Government Sponsored Enterprises (GSEs) have implemented policies to make credit more widely available, such as FHA’s reduction of its annual mortgage insurance premiums and the Government Sponsored Enterprises (GSEs) acceptance of three percent downpayment mortgages. However, the impact of these measures in attracting first-time

23%

0%5%

10%15%20%25%30%35%40%

2008

1020

0903

2009

0820

1001

2010

0620

1011

2011

0420

1109

2012

0220

1207

2012

1220

1305

2013

1020

1403

2014

0820

1501

2015

0620

1511

2016

0420

1609

2017

02

All-Cash Sales as a Percent of Residential Sales as of March 2017

63%

49%44%

39%

14%8%

0%10%20%30%40%50%60%70%

Investor DistressedSale

Second Home International Relocation First-timeBuyer

Percent of All-Cash Sales Across Types of Buyerin March 2017

*The RCI survey captures only non-U.S. citizens whose permanent residence is in another country (Type A). NAR has a separate survey on foreign buyers that captures both Type A buyers and non-U.S. citizens who reside in the United States on work, student, or other types of visas (Type B).

22

homebuyers appears to be modest for a variety of reasons. Lack of information about these products may be one reason. In fact, NAR’s 2016 Q3 Housing Opportunities and Market Experience (HOME) Survey found that only 13 percent of those aged 34 years or under believe they need a downpayment of five percent or less.31 Additionally, although low downpayment loans are available, some buyers may want to save for a bigger downpayment to meet underwriting standards (e.g., debt-to-income ratios), save on mortgage insurance, or get a lower interest rate.

Still, first-time homebuyers are more likely to take advantage of a low downpayment loan compared to all homebuyers. Among first-time homebuyers who obtained a mortgage and whose transactions closed in December 2016–March 2017, 78 percent made a downpayment of less than 20 percent.32 Among all buyers whose transaction closed in March 2017, 62 percent of those who obtained a mortgage made a downpayment of less than 20 percent.

31 See: http://www.realtor.org/reports/2016-q3-homeownership-opportunities-and-market-experience-home-survey. 32 To increase the sample size for first-time homebuyers, NAR uses information from the last three surveys.

74%

63%

50%55%60%65%70%75%80%

2009

0620

0912

2010

0420

1008

2010

1220

1104

2011

0820

1112

2012

0420

1208

2012

1220

1304

2013

0820

1312

2014

0420

1408

2014

1220

1504

2015

0820

1512

2016

0420

1608

2016

12

Share of First-time Buyers Obtaining a Mortgage Who Put in a Zero to Six Percent Downpayment as of March 2017*

*The data reported for the month is a rolling three-month figure.

62%

78%

50%55%60%65%70%75%80%85%90%

2011

0620

1109

2011

1220

1203

2012

0620

1209

2012

1220

1303

2013

0620

1309

2013

1220

1403

2014

0620

1409

2014

1220

1503

2015

0620

1509

2015

1220

1603

2016

0620

1609

2016

1220

1703

Share of Buyers Obtaining a Mortgage Who Put in Less than 20 Percent Downpayment as of March 2017*

All Buyers First-time Buyers*

*The data reported for the month is a rolling three-month figure.

23

III. Issues Affecting Transactions

Contract Settlement: Financing, Home Inspection, and Appraisals Are Major Issues Most contracts are settled on time. Among respondents who reported they had a contract that went into settlement or was terminated over the period December 2016–March 2017, 70 percent reported that the contracts were settled on time, 23 percent had a delayed settlement, and seven percent reported that the contract was terminated.

70%

23%7%

2015

01-2

0150

320

1502

-201

504

2015

03-2

0150

520

1504

-201

506

2015

05-2

0150

720

1506

-201

508

2015

07-2

0150

920

1508

-201

510

2015

09-2

0151

120

1510

-201

512

2015

11-2

0160

120

1512

-201

602

2016

01-2

0160

320

1602

-201

604

2016

03-2

0160

520

1604

-201

606

2016

05-2

0160

720

1606

-201

608

2016

07-2

0160

920

1608

-201

610

2016

09-2

0161

120

1610

-201

612

2016

11-2

0170

120

1612

-201

702

2017

01-2

0170

3

0%20%40%60%80%

100%

How Sales Contracts Were Settled

Contract was terminatedContract was delayed but eventually went into settlementContract was settled on time

* Based on the respondent's most recent contract that went into settlement or was terminated during this three-month period.

24

Among contracts that had a delayed settlement (23 percent), 30 percent faced issues related to obtaining financing and 21 percent had appraisal issues.

While they are still the top cause of delay, issues related to obtaining financing have been cited by fewer respondents than when NAR first tracked this indicator. Forty percent of those reporting a delay cited a financing issue. The decline may reflect the improvement in the economic environment, better credit histories from borrowers, and improvement in the loan evaluation processes of mortgage originators. Regarding appraisal issues, respondents reported facing appraisal delays due to a shortage of appraisers, valuations that are not in line with market conditions, and “out-of-town” appraisers who are not familiar with local conditions. In NAR’s Survey of Mortgage Originators, 55 percent who took part in the survey reported some level of issues getting appraisals.33 Other specific issues that led to delays involved titling, sale contingencies, problems related to distressed sales, home/hazard/flood insurance issues, and the buyer losing a job.

33 Ken Fears, 2016 Survey of Mortgage Originators, Fourth Quarter, Economists Outlook Blog. See http://economistsoutlook.blogs.realtor.org/2017/02/07/survey-of-mortgage-originators/

30%21%

15%13%

8%6%6%

1%0%

21%

Issues related to obtaining financingAppraisal issues

Home inspection/environmental issuesTitling/deed issues

Contingencies stated in the contractIssues in buy/sell distressed property

No problems encounteredHome/hazard/flood insurance issues

Buyer lost jobOther

Problems Encountered for Contracts That Were Delayed But Eventually Went Into Settlement in January–March 2017*

(Delayed Contracts Represent 23 Percent of Closed or Terminated Contracts)

*Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, delays related to complying with regulation, etc.

25

Among contracts that were terminated (seven percent), 25 percent faced issues related to home inspections and 20 percent had issues related to the buyer’s ability to obtain financing.

18%21%

40%

30%

10%15%20%25%30%35%40%45%50%

2015

02-2

0150

420

1503

-201

505

2015

04-2

0150

620

1505

-201

507

2015

06-2

0150

820

1507

-201

509

2015

08-2

0151

020

1509

-201

511

2015

10-2

0151

220

1511

-201

601

2015

12-2

0160

220

1601

-201

603

2016

02-2

0160

420

1603

-201

605

2016

04-2

0160

620

1605

-201

607

2016

06-2

0160

820

1607

-201

609

2016

08-2

0161

020

1609

-201

611

2016

10-2

0161

220

1611

-201

701

2016

12-2

0170

220

1701

-201

703

Percent of Contracts with Delayed Settlement Which Had Issues Related to Obtaining Financing and Appraisal

Appraisal Issues Issues Related to Obtaining Financing

25%20%

11%9%

5%5%

4%4%

2%30%

Home inspection/environmental issuesIssues related to obtaining financing

Appraisal issuesContingencies stated in the contract

No problems encounteredTitling/deed issues

Home/hazard/flood insurance issuesIssues in buy/sell distressed property

Buyer lost jobOther

Problems Encountered for Contracts That Were Terminatedin January–March 2017*

(Terminated Contracts Represent Seven Percent of Closed or Terminated Contracts)

*Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, etc.

26

The NATIONAL ASSOCIATION of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing over 1 million members, including NAR’s institutes, societies, and councils, involved in all aspects of the real estate industry. NAR membership includes brokers, salespeople, property managers, appraisers, counselors and others engaged in both residential and commercial real estate. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics. Working for America's property owners, the National Association provides a facility for professional development, research, and exchange of information among its members, and to the public and government for preserving the free enterprise system and the right to own real property. The Mission of the NATIONAL ASSOCIATION of REALTORS® Research Division is to collect and disseminate timely, accurate, and comprehensive real estate data and to conduct economic analysis in order to inform and engage members, consumers, policy makers, and the media in a professional and accessible manner. To find out about other products from NAR’s Research Division, visit www.REALTOR.org/research-and-statistics Also, follow NAR Research on

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NATIONAL ASSOCIATION of REALTORS® Research Division 500 New Jersey Avenue, NW Washington, DC 20001 202.383.1000