Commercial PropertyAre Older Homes Becoming More Difficult To Sell?
According to the National Association of Realtors 2006 Profile of Home Buyers & Sellers, historically 20 percent of homes purchased are new. In 2006, that figure rose to over 22 percent. While 78 percent of homebuyers purchased an existing home, is a trend developing that will make older homes more difficult to sell?
That depends largely on what homebuyers say they want and what they are willing to settle for.
New homes offer many advantages over older homes, particularly builder guarantees, up-to-date codes in plumbing and electrical wiring, and esthetics buyers want like open floorplans, tall ceilings, and other amenities not usually found in older homes.
But newer homes are usually found in suburbs, and sprawl is taking new developments further and further away from central city cores. Transportation costs have doubled this year for commuters. When it comes to buying a home, will homebuyers choose new homes in the suburbs, or will they prefer the shorter commute from an older home in the city?
That depends largely on how agents respond to the lifestyle challenges posed by new homes. Will they let their customers drive away to the suburbs or will they work to help existing neighborhoods appreciate?
While Southern homebuyers (26 percent) bought new homes more frequently than other regions (13 percent in the Northeast) in 2006, that number corresponds with builders" ability to build. While the Northeast is hamstrung with building restrictions in many areas, the South still has large tracts of buildable land where developers can create planned communities and shared amenities such as parks, playgrounds, walking/biking trails and swimming pools.
Three out of four homes purchased in 2006 were single-family detached homes, with density once again influencing buyers" choices. In the Northeast, they were less likely to buy single-family detached homes because of greater expense and limited availability. Fifty-five percent of homebuyers chose the suburbs with only 17 percent choosing to buy in the central city. In contrast, first-time homebuyers were more likely to purchase in the central city (23 percent) than repeat buyers (14 percent).
Motivating homebuyers were multiple drivers including the quality of the neighborhood (63 percent), convenience to jobs (48 percent), proximity to family and friends (36 percent), neighborhood design (28 percent), quality of schools (27 percent), convenience of schools (19 percent). Less important were convenience to entertainment/leisure activities (19 percent,) convenience to parks/recreational facilities (16 percent,) and ease of access to health facilities (11 percent.) Eleven percent said they wanted a home in a planned community.
One thing in favor of older homes that is being reflected in the current slowdown is cost. In 2006, the median price of a new home was $250,000, up 10.5 percent over 2005. The median price of an older home was $200,000, up 8.1 percent over 2005.
The typical home purchased was 1,815 square feet, with first-time buyers choosing homes of about 1,516 square feet. Repeat buyers spread out to 1,993 square feet.
Interestingly, 36 percent of buyers said they made no compromises in their choices of homes. Nineteen percent of homebuyers compromised on the size of the home while 17 percent compromised on the price they planned to pay. Fifteen percent compromised on the condition of the home.
The median home in the U.S., according to the American Housing Survey for the United States in 2005, was built in 1973 with the largest bulk of homes built between 1950 and 1979. A whopping 80 percent of existing homes were built before 1980.
Yet, in 2005, according to the Office of Federal Housing Enterprise Oversight, 60 percent of homebuyers purchased homes that were 10 years old or less in 2005.
So what do these stats tell you as an agent?
Most existing inventory for sale will be older homes.
Most older homes will be in the central city.
Most buyers are choosing newer homes to purchase.
The obvious conclusion is that inventories of existing homes older than 10 years will rise, presenting more challenges to real estate agents who specialize in marketing and selling older homes and to sellers who want their homes to compete in today"s market.
The solution? Older homes are more desirable than newer homes when they can better address buyers desires for good neighborhoods near jobs that are designed to foster community and family life.