Was the late-2020-into-early-2021 real-estate market really as hot-hot-hot (and chaotic) as anecdotal evidence suggests?
A new analysis says maybe not. Although it also suggests the process was more challenging for first-time buyers.
The record-setting housing market that began several months after the onset of COVID brought anecdotes of frustrated home shoppers being repeatedly outbid and using risky strategies, such as waiving contingencies, to be competitive. But new data from Zillow’s Consumer Housing Trends Report debunks common misconceptions that all buyers had the same experience, and shows the reality for most was not as grim.
The typical buyer surveyed this year submitted just two offers before one was accepted, up from one in each of the previous three years. A vast majority of buyers (88 percent) had an inspection done before they closed on their new home – another case where anecdotal evidence seemed to paint a different picture, one of purchasers eschewing protections like an inspection in order to buy a property.
“Our 2021 survey of buyers found buying a home got more challenging in the past year, but many buyers were ultimately successful in landing a home without taking unnecessary risks,” said Manny Garcia, a Zillow population scientist. “Most buyers continue to get inspections, and sellers appear to prioritize higher offers over waived inspections. Most buyers are ultimately achieving home-ownership by doing their research, making trade-offs and considering a diverse array of options.”
The survey finds first-time buyers do generally struggle more than repeat buyers. First-time buyers tend to have smaller down payments – in large part because they are much less likely to have equity from a previous home – which can make their offers seem less competitive. About two-thirds (67 percent) of first-time buyers submit more than one offer, compared to 54 percent of repeat buyers.
Before the offer comes the quest, and the survey shows that the pandemic brought some changes in how buyers shop for, view and tour homes. While desire for virtual tools and 3D home tours is growing, home shoppers still value seeing a home inperson before making an offer.
Nearly all buyers surveyed took a private tour before putting in an offer, and most attended at least one open house.
In 2020 and 2021, the typical buyer went on three private tours – up from just one in previous years – and only 5 percent skipped a private tour completely. Despite the pandemic, most home shoppers are also still going to at least one open house. The typical buyer went to one open house, and over half (56 percent) attended between one to four.
“So many buyers are hearing horror stories from friends and family about the housing market, so it’s important to educate buyers about the local market so they can make the best decision for their family,” says Tom Toole, team lead at Tom Toole Sales Group at RE/MAX Main Line. “Buyers still strongly prefer in-person tours, but virtual tours help people see a home if circumstances don’t allow and have helped a number of buyers get a speed advantage in the market. ‘Virtual‘ tools are a great addition to help buyers decide what houses they want to go see in person.”
Although in-person viewing remains a priority for home shoppers, the desire for 3D and virtual tours is also high and increasing from past years.
Survey respondents agreed that 3D tours would help them get a better feel for the home than static photos (68 percent); wish more listings had 3D tours available (61 percent); and prefer to schedule in-person tours online (61 percent). All of these categories increased since 2020, showing buyers value virtual tools because they make it easier to shop for a home.
Additionally, the share of buyers who say they are at least somewhat confident making an offer after seeing a virtual tour, but not an in-person viewing, increased from 55 percent to 58 percent this year.
The fall market has shown signs of cooling as home-value appreciation begins to slow and inventory continues to grow each month. Even though sellers are still firmly in the driver’s seat, buyers may find more options and less competition, making this a potentially more manageable market.