Editor’s note: This is Part 3 in a series of stories based on an Inman News survey of nearly 200 real estate brokers. Part 3, below, details the segments in which brokerages are gaining or losing business. Part 1 explored brokers’ views of the government’s role in the industry, and Part 2 examines brokers attitudes about rules and policies established by the industry itself. Part 4 will look at cost-cutting measures implemented by brokerages, and Part 5 will explore what brokers see as their company’s competitive advantage.
First-time homebuyers not only account for the largest share of home sales in many markets, but represent the fastest-growing segment of home sales in nearly half of those markets, brokers surveyed by Inman News report.
Second homes and move-up homes, on the other hand, are the most rapidly shrinking segment of their business, brokers responding to the survey said.
Homes sold to first-time buyers made up the largest share of home sales for 37 percent of brokers surveyed by Inman News from Oct. 16, 2009, to Jan. 12, 2010.
The online survey includes the views of 179 brokers doing business in 37 states and Washington, D.C., plus two responses from Canada and one from India. States with the greatest representation in the survey were California (31 responses), New York (22 responses), Colorado (13 responses), Massachusetts (10 responses), Washington (nine responses), and Arizona (eight responses).
An average of 96 agents were employed at the brokerages surveyed, with companies employing fewer than 1,000 agents averaging 53 sales positions.
About one-quarter of the 161 brokers responding to that question said bank-owned (REO) properties accounted for the largest share of sales in their market, while 16 percent said short sales dominated.
Brokers also cited sales to first-time homebuyers as the fastest-growing segment in their market (32 percent of 162 responses) followed by short sales (30 percent) and bank-owned (REO) properties (28 percent).
Among brokers who said first-time homebuyers represented the largest share of their market, an even higher percentage — 46 percent — said first-timers were also the fastest-growing market segment.
Second-home purchases were the most rapidly shrinking segment of home sales, 48 percent of the 163 brokers responding to that question said, followed by move-up homes (33 percent), REO sales (5 percent) and high-end sales (5 percent).
In the first part of the survey, brokers said the first-time homebuyer tax credit — recently extended and expanded to include some longtime homeowners — was the most beneficial government law or regulation affecting their business (see story).
"The homebuyer tax credit has been a lifesaver for our market," said a Colorado broker at a company with more than 100 agents. "This has been one of the biggest movers of the mid-level-priced homes. With the advent of the extension and the inclusion of move-up buyers, this will further strengthen the absorption of distressed inventory and give people a greater chance to move into the home they can afford." …CONTINUED
Some critics have questioned the effectiveness of the tax credit, saying that most who are claiming it would have purchased a home anyway.
Surprisingly, only 20 percent of brokers who said first-time homebuyers were the fastest-growing segment of their market cited incentives like the homebuyer tax credit as the most beneficial government law or regulation affecting their business, compared with 29 percent of those surveyed overall.
For first-time homebuyers — defined as those who haven’t owned a home in the last three years — the tax credit is equal to 10 percent of a home’s purchase price up to $8,000.
In extending the tax credit to homebuyers under contract by April 30 and closing by June 30, Congress also expanded the program to allow homeowners who have been in a principal residence for at least five of the last eight years to claim a tax credit of up to $6,500 if they sell that home and buy another.
Income limits for claiming the credit have also been raised from $75,000 to $125,000 for individuals and from $125,000 to $225,000 for couples, although home purchases exceeding $800,000 are not eligible.
A Colorado broker at a two-agent firm reported second-home purchases were not only the largest, but the most rapidly shrinking segment of the market, wished the government could provide "a solid secondary market for resort condominium loans and more realistic loan programs for ‘subprime’ borrowers."
A Sacramento, Calif.-based broker who’s said move-up sales are the most rapidly shrinking market segment cited the Home Valuation Code of Conduct — rules for appraisals on mortgages purchased or guaranteed by Fannie Mae and Freddie Mac — as the most problematic government rule or regulation.
"The (code) is difficult for our agents, mainly because we are a boutique brokerage," the broker said. "We specialize in specific, mainly upper-end, older neighborhoods. An appraiser has to know the idiosyncrasies of these neighborhoods as there are no two houses alike." (See more brokers’ concerns about the Home Valuation Code of Conduct in Part 1.)
A Michigan broker who said bank-owned properties account for the largest share of sales in that market complained that the Federal Housing Administration’s 90-day waiting period for investor-owned homes was a hindrance.
"Investors purchase the homes, it takes a month to remodel (them), and then the home can only be marketed as conventional or rural development for 60 days," the broker said. "We lose FHA purchasers for the most important time of a listing — the first two weeks."
FHA, which lifted the 90-day waiting period on resales of all bank-owned (REO) properties in 2008, this month suspended for one year the waiting period on investor and other property resales, saying it has put FHA borrowers at a disadvantage in bidding on foreclosed properties.
If the sales price increases by more than 20 percent from the seller’s acquisition cost, lenders must provide supporting documentation or a second appraisal justifying the increase (see story).
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