Recent data reveals just how substantially the homebuying process has changed throughout the course of the coronavirus pandemic.
Buyers are writing bigger down-payment checks, making offers well-over the asking price, waiving more contingencies, and going on additional home tours in order to compete. That's because of the high demand and low inventory created by a collection of pandemic-related factors.
“A seller of mine recently received 27 offers for their four-bedroom single-family home in Antioch, CA,” said Ralph Martinez, a local Redfin listing specialist. “The winning bid was $31,000 over the $499,000 list price and waived the inspection contingency and the appraisal contingency.”
Redfin looked at several of the most significant changes:
The median down payment on a home during the last six months was $40,987, up from $32,261 during the same period a year earlier. That’s an increase of 27%, or nearly $9,000. The typical homebuyer made a down payment equal to 15.9% of the sale price, compared with 15.3% a year earlier.
The down payments grew along with home prices—the median home sale price over the last six months was $333,322, up from $292,945 a year before.
“The surge in home prices actually hasn’t resulted in higher monthly mortgage payments for most buyers because it has been offset by low mortgage rates, but it has driven up down-payment costs,” said Redfin Chief Economist Daryl Fairweather. “This is likely putting homeownership out of reach for many cash-strapped first-time buyers who can’t afford to put an additional $9,000 down.”
Throughout the past six months, 17.6% of successful offers submitted by Redfin agents waived the appraisal contingency, up from only 6.1% during the same period a year earlier. The share of successful offers waiving the inspection contingency jumped to 13.2% from 7.3%, and the portion waiving the financing contingency increased to 13.2% from 10.1%.
More conventional loans
More than half (53%) of home sales in the last six months were paid for using conventional loans, or loans that are provided by private lenders and not backed by the federal government.
“Lenders have been tightening up requirements for borrowers during the pandemic because so many families are at risk of defaulting on their mortgage payments,” Fairweather said. “This means that many lower-income Americans have been unable to qualify for the loans they need to become homeowners and start building home equity. But as lenders become more confident in the economic recovery, they will be more willing to offer loans to borrowers with less-than-immaculate credit.”
On-site home tours and the lengthened buying process
Homebuyers toured 14 homes on average during the last six months, up from 13 homes a year earlier. From start to finish, the homebuying process took a median of 96 days, compared with 91 days during the same period the prior year. It’s taking longer to find homes in part because there’s an intensifying housing shortage that’s causing many house hunters to get repeatedly outbid.
“Within hours of a home hitting the market, the showing schedule is often completely booked up,” said Laurene Broccard, a Redfin real estate agent in Raleigh, NC. “We’ve seen properties get over 70 showings in three days and up to 30 offers. There are frequently buyers who want to see a home, but it goes under contract before they even have a chance to tour it.”
Redfin provides the entire data set and analysis at Redfin.com.