A renewed interest in homeownership during the COVID-19 pandemic has changed buyers’ housing choices, widened the imbalance between supply and demand and created a more competitive market than ever before, according to a survey released Monday by the California Association of Realtors.
With remote working becoming more common since the coronavirus outbreak began, more than two of five Realtors surveyed (43.6%) saw a change in buyers’ preferences in the property type they want to purchase, according to CAR’s 2020 Annual Housing Market Survey.
Of those changes, 39% of the agents said their buyers are opting for a bigger home; 35% said buyers are opting for a property with more rooms; 37% said buyers are less concerned about the commute time to work; 37% said buyers are opting to live in a suburb rather than a city; and 26% said buyers are opting to live in rural areas rather than cities or suburbs.
More people are buying vacation or second homes this year, with the share of total sales in that housing category rising to the highest level in four years. The flexibility to work from home and the desire to move from metropolitan areas motivated homebuyers to relocate to resort communities in search of more space and a healthier lifestyle, according to the survey.
The top three reasons homebuyers purchased a home remain the same as last year. A quarter (25%) were tired of renting, one of five (20%) bought because they desired a larger home, and one-fifth (19%) desired a better location.
With the cost of borrowing at historic lows, buying a home makes more sense than renting for many first-time buyers, according to CAR. As such, more than half (54%) of all first-time buyers purchased a home because they were tired of renting. For repeat buyers, 25% said their primary reason for buying was a desire for a larger home, an increase from 21% last year.
Homes for sale received more multiple offers, and the average number of offers reached their highest levels since 2013, the survey showed Nearly two- thirds (59.2%) of homes sold in 2020 received multiple offers at an average of 4.8 offers per home. In 2019, less than half (47.7%) of homes sold received multiple offers, with an average of 3.9 offers on each home.
Further illustrating the high level of competitiveness this year, over a third (35.5%) of homebuyers paid more than what home sellers asked for this year, compared to a quarter (26.7%) in 2019. In fact, this year’s level is the highest in seven years and is 16% higher than the long-run average.
While all price segments were more competitive than the prior year, market competition varied between price segments. Mid-priced range homes ($500,000 to $1 million) were the most sought after with 67.3% receiving multiple offers. They also received the most multiple offers (6 offers), were the most likely (37.3%) to receive an offer at or above the asking price and sold the fastest (10 days).
The survey found that home sellers typically pocketed a net gain of $210,000 from their home sale — a 63.8% increase from the purchase price. Not surprisingly, the gain was greater the longer they owned their home. Sellers who lived in their home for less than five years typically earned a 16.5% profit from their sale, while those who lived in their house five or more years typically earned a 100% profit, according to CAR, which has conducted the annual survey since 1981.
The survey was sent via email to a random sample of 60,124 Realtors throughout California, asking them to provide information about their most recent sales transaction that closed escrow between April and August. The survey instrument was a questionnaire with both multiple choice and open-ended questions. There were 3,103 valid survey responses, equivalent to a response rate of 5.2%. The margin of error for the survey was +/- 1.8 percent at a 95% confidence level.
— City News Service