DECLINING AFFORDABILITY PUSHES
HOMES OUT OF REACH FOR SOME

Despite low mortgage interest rates, a smaller percentage of first-time home buyers are entering the market, according to an annual profile of buyers and sellers released by the National Association of Realtors on Saturday.

During the year ending in June, 36% of all buyers who purchased a home were first-time buyers, according to the association's annual profile of home buyers and sellers. That's down from 40% a year ago. About 7,500 buyers and sellers were surveyed.

Part of the reason for the declining share of first-time homeowners: Declining affordability for those entering the market after the housing boom of the past couple years bumped up home prices, said David Lereah, the NAR's chief economist, during a news conference held at the Realtors' annual convention here. A greater number of second-home sales also may have contributed to a lower percentage of first-time buyers overall.

"I hope that it's not a trend. I hope that as affordability starts to improve we see more first-time home buyers," he said. "It's critical for the housing sector."

The percentage of single female home buyers, however, inched up in the survey to its highest level on record. Twenty-two percent of all home buyers were female and on their own, up from 21% a year ago and up from 14% in 1995. In comparison, single males accounted for 9% of home buyers, unchanged from last year.

Other statistics helped validate the jobs of the thousands of Realtors at the convention: 80% of home buyers said they used the Internet to search for a home, but 85% relied on a real-estate agent as a source of information about homes for sale. And 36% first learned about the home that they purchased from an agent, versus the 24% who learned about the home that they purchased online. Among those who used the Internet to search for a home, 81% purchased a home using a real-estate agent.

Although real-estate agents were leery of the Internet 10 years ago, fearing it would take away business, 80% of firms now have their own Web sites, Lereah said.

"What the Internet has done for consumers, potential buyers, is provide them with information, give them a comfort level," he said. "But it all comes down to you're making the biggest financial transaction you're ever going to make for 99% of these people -- and they need guidance, they need someone they can trust and who has been through this before."

From the seller's side

Reflecting the beginning of a softening market, sellers had their homes on the market for a median of 6 weeks, according to the report, an increase from the 4-week median reported a year ago. "It makes some sense: We had a boom in 2005, and in this time period, we're coming to a close and beginning to stall," Lereah said.

The typical home sold for 98% of the listing price in this year's report; it sold for 99% of its listing price a year ago. But even in this year's figures, 12% of homes sold for more than its listing price.

Nineteen percent of sellers said that the primary reason for selling their home was because it was too small, while 13% said the neighborhood was less desirable and 10% decided to move so they could be closer to their job. The typical home seller owned their home six years.

Twelve percent of sellers said they sold their home without a real-estate agent, down from 13% a year ago and 20% -- the report's recorded high -- in 1987. Of those who sold their home on their own in this year's survey, 40% said they sold the property to someone they already knew.

Of those who did use an agent, 73% used a full-service agent, 8% used a discount broker and 7% used a minimum-service agent who may have done as little as list the home on the Multiple Listing Service, the survey found.

"Limited and minimal brokerage services cater largely to owners who would prefer to sell on their own but recognize they need some level of professional help," Thomas M. Stevens, president of the National Association of Realtors, said in a news release. "These services generally are a good match for certain consumers, and help to explain a decline in owners selling purely on their own."

-- November 20, 2006

By Amy Hoak

Marketwatch