NEW YORK (MainStreet) — What will the housing market look like in 2013?
The ERA Real Estate office in Parsippany, N.J., worked with clinical psychologist Leslie Reisner to put what it calls an “offbeat, but interesting” magnifying glass to U.S. consumer homebuying behaviors, finding that the worst housing market since the Great Depression has radically altered the mindset of U.S. consumers.
What are the “emotional behavior” trends that top the list? Here’s a snapshot:
- Buyers are better-informed and decisive. The ERA actually calls this type of buyer the “broker’s backup.” It signifies a buyer who is “well-researched and knowledgable” and “very active” in the entire homebuying process. The backup buyer isn’t in it for investment purposes; he or she wants a great place to live and plant some roots. “A good number of clients know exactly what they want and are savvy with pricing,” says Ranelle Birmingham, a broker at ERA Sarver Real Estate. “I have seen a pattern of buyers making lower offers than normal and then walking away to another house that meets their criteria if the offer is not accepted.
- Families are increasingly multigenerational. The days of a young mom and dad, or a single professional buying a home for their own needs, is going the way of the incandescent light bulb. The ERA sees a big rise in multigenerational families buying homes, with everyone living under one roof – grandma and grandpa included. “Buyers in this situation are not only reacting to current conditions, but also planning for their future, keeping their immediate and extended family top-of-mind when purchasing a home,” the ERA says.
- Buyers don’t want fixer-uppers. the 2013 homebuyer increasingly wants a home that is “move-in ready.” They want up-to-date properties, and given a choice between buying a home that needs repairs or paying a little more for a “ready-to-roll” property, they’re digging deeper and paying for the higher-quality property. “Think HGTV,” said broker William Hurt of ERA Shields Real Estate. “There are buyers out there that want premium properties. Some have to compromise on price to get them but will do so in order to gain a home in great condition.”
- The age of the McMansion is over. Buyers are no longer panting for the suburban mansion or the urban colonial with five bedrooms. Instead, they want to scale down the ladder, buy a small home and use the extra money (and sanity) to travel more and indulge in favorite hobbies that involve more fishing for trout than digging out grout.
In short, maybe it is your father’s (or grandfather’s) homebuying mindset: Smaller is better, and the more family member on the premises, the better.
“As our economy continues to recover, buyers are on definitely on the move,” Reisner says. “However, the way consumers approach buying a home today is different than it was during the real estate boom. Lifestyles have changed and therefore, behaviors have changed.”
ERA’S chief executive, Charlie Young, agrees.
“Coming out of the recession, peoples’ attitudes about homeownership have changed, and our brokers and agents are seeing that evidenced in more multigenerational living, downsizing as a choice, living more simply and a return to homeownership as a lifestyle decision versus an investment decision,” he says. “Right now, we are noticing that people’s biggest concerns are tied to lifestyle motivations, such as new parents expanding to accommodate for a new baby, empty-nesters with too much space or career-focused people seeking the right home in a new city for a new job.”
Jed Kolko, chief economist at the housing sector analytical firm Trulia, also has a few thoughts on the homebuying market next year.
The U.S. housing market is only 47% “back to normal” after the onslaught of the Great Recession, but the long-sought housing market bottom has been reached and home prices should rise across the country next year, he says.
Kolko also predicts tough new regulatory rules for mortgage lenders, as well as a more balanced price ratio between owning versus lending a home as rental prices rise in key urban areas such as Miami and San Francisco.
He’s also calling for a cut in the mortgage interest deduction to help balance the federal budget, and a power shift in housing market oversight from the federal government to state and local governments.
But that’s the “big picture,” and it will be interesting to see a year from now if Kolko is on the money or not.