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REALTORS ® CONFIDENCE INDEX SURVEY

Report on the February 2016 Survey

The REALTORS ® Confidence Index (RCI) report provides monthly information about real estate market conditions and expectations, buyer/seller traffic, price trends, buyers’ characteristics, and issues affecting real estate based on a monthly survey of REALTORS ® .

The February 2016 report is based on the responses of 3,109 REALTORS ® about local market conditions experienced in February and the characteristics of their most recent sale for the month. The data collected from a random sample of REALTORS ® is viewed to be representative of the sales for the month. 1 The online survey was conducted from March 1–9, 2016. All real estate is local: conditions in specific markets may vary from the overall national trends presented in this report. REALTORS ® may be interested in comparing their markets against the national summary.

The RCI report is an output of the Research Division of the NATIONAL ASSOCIATION of REALTORS ® . 2 For questions or information about this report, please email dhale@realtors.org.

Lawrence Yun, Senior Vice President and Chief Economist Danielle Hale, Managing Director, Housing Research Gay Cororaton, Research Economist Meredith Dunn, Research Communications Manager

Research Division

NATIONAL ASSOCIATION of REALTORS ® 500 New Jersey Avenue, NW Washington, DC 20001

202.383.1000

1 The survey is sent to 50,000 REALTORS ® who are selected through simple random sampling. To increase the response rate, the survey is also sent to respondents in the previous three surveys who provided their email addresses. The number of responses to a specific question varies because the question may not be applicable to the respondent or because of non-response. To encourage survey participation, eight REALTORS ® are randomly selected to receive a gift card. 2 Thanks to Jessica Lautz, Managing Director, Survey Research and Communications, Meredith Dunn, Research Communications Manager, Brandi Snowden, Research Survey Analyst, and Amanda Riggs, Research Survey Analyst, for their input in improving the survey questions and in editing the report.

Table of Contents

 

Summary

3

I.

Market Conditions

4

REALTORS® Largely Reported an Improvement in Market Conditions

4

REALTORS® Still Generally Optimistic Over the Next Six Months

5

REALTORS® Reported Uptick in Buyer Traffic amid Tight Supply

7

REALTORS® Typically Expect Prices to Increase By 3.6 Percent in Next 12 Months

9

Properties on the Market for 59 Days

10

II. Buyer and Seller Characteristics

12

Sales to First-Time Buyers: 30 Percent of Sales

12

Sales for Investment Purposes: 18 Percent of Sales

12

Distressed Sales: 10 Percent of Sales

13

Cash Sales: 25 Percent of Sales

14

Former Renters: 38 Percent of Homebuyers

15

III.

Current Issues

15

Impact of TRID Regulations on Contract Settlement

15

Contract Settlement Issues: Financing, Home Inspection, and Appraisals are Major Issues

17

Summary

Market conditions vary across local markets, but the REALTORS ® confidence and traffic indices indicate that overall market activity improved in February 2016 compared to one year ago and to the previous month. Sustained job creation and the low cost of obtaining a mortgage continue to support housing demand. However, lack of supply across many states is weighing on sales and driving up prices, making homes less affordable especially for first-time buyers.

First-time home buyers accounted for 30 percent of sales. Purchases for investment purposes made up 18 percent of sales, while distressed properties were ten percent of sales. Respondents from New York, a state which follows a judicial foreclosure process that typically takes longer than a non-judicial process, reported an increase in distressed properties in the market. Cash sales accounted for 25 percent of sales. Nationally, properties typically were on the market 59 days and took 40 days to close the contract. There are reports that TRID has led to longer rate lock and escrow periods, but there are also reports that TRID has been “fairly easy to deal with” and that the new rules “are not a major problem” largely because the industry prepared for the changes in the time between announcement and implementation. 3

Very low supply, steep price increases, and lender processing delays were reported as the key issues affecting sales, especially to first-time homebuyers. Appraisal backlogs and “below- market” and “inconsistent” appraisals were also reported to be causing transaction delays and cancellations. The collapse in oil prices is also a concern in oil-producing states such as Texas, Wyoming, Montana, and Oklahoma. Still, with the spring and summer months coming, respondents were generally confident about the outlook for the next six months across all property types. Respondents typically expected prices to increase 3.6 percent in the next 12 months.

February 2016 REALTORS ® Confidence Index Survey Highlights

 

Feb 2016

Jan 2016

Feb 2015

RCI Current Conditions: Single-Family Sales

64

59

63

RCI Six-Month Outlook: Single-Family Sales

76

75

75

RCI Buyer Traffic Index

65

59

61

RCI Seller Traffic Index

43

40

41

First-Time Home Buyers, as Percent of Sales 4

30

32

29

Sales to Investors, as Percent of Sales

18

17

14

Cash Sales, as Percent of Sales

25

26

26

Distressed Sales, as Percent of Sales

10

9

11

Median Days on Market

59

64

62

Median Expected Price Growth in Next 12 Months (%)

3.6

3.4

3.4

3 The TILARESPA Integrated Disclosure (TRID) regulations came into effect on October 3, 2015. The new guidelines are intended to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage for which they are applying. 4 NAR’s 2015 Profile of Home Buyer and Sellers (HBS) reports that among primary residence home buyers, 32 percent were first-time home buyers. The HBS surveys primary residence home buyers, while the monthly RCI Survey surveys REALTORS ® and also captures purchases for investment purposes and vacation/second homes.

I. Market Conditions

REALTORS® Largely Reported an Improvement in Market Conditions

Market conditions vary across local markets and states, but the indices on current conditions indicate that overall market activity improved in February 2016 compared to one year ago and to the previous month. Housing demand has remained strong amid the sustained creation of 200,000250,000 jobs monthly since 2014 and the low cost of obtaining a mortgage, with 30- year fixed rates still at below four percent.

The REALTORS ® Confidence Index—Current Conditions chart below shows that the single- family homes index rose to 64, a level consistent with more respondents citing “strong” than “weak” market conditions (59 in January 2016; 63 in February 2015). 5 The indices for townhomes and condominiums improved but remained below 50, which indicate that more respondents viewed their markets as “weak” rather than “strong.” REALTORS ® continued to report on the difficulty of obtaining financing for condominium unit purchases because many condominiums are not FHA or GSE eligible. 6

REALTORS® Confidence Index—Current Conditions as of February 2016

80

60

40

20

0

Single-family Townhome Condominium 200801 200806 200811 200904 200909 201002 201007 201012 201105 201110
Single-family
Townhome
Condominium
200801
200806
200811
200904
200909
201002
201007
201012
201105
201110
201203
201208
201301
201306
201311
201404
201409
201502
201507
201512

64

48

44

5 This is a diffusion index which measures the direction of and broadness of the respondents’ market conditions or confidence. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.

6 FHA and the GSEs have financing eligibility criteria relating to ownership occupancy requirements, delinquent dues, project approval process, and use for commercial space. See the Statement of the National Association of REALTORS® Submitted for the Record to the Senate Committee on Banking Housing and Urban Affairs on December 9, 2014 at

REALTORS® Still Generally Optimistic Over the Next Six Months

Local market conditions vary, but with the spring and summer months coming, REALTORS ® remained by and large confident about the outlook over the next six months. 7 The REALTORS ® Confidence Index—Six-Month Outlook for single-family homes registered at 76 (75 in January 2016; 75 in February 2015). The confidence index for townhomes held above 50 for the fourth straight month at 58 (57 in January 2016; 55 in February 2015), while the index for condominiums stayed above 50 for the third consecutive month at 53 (52 in January 2016; 50 in February 2015). An index above 50 indicates more respondents view markets as “strong” than “weak”.

REALTORS® Confidence Index—Six-Month Outlook as of February 2016

80

60

40

20

0

Single-family Townhome Condominium 200801 200805 200809 200901 200905 200909 201001 201005 201009 201101
Single-family
Townhome
Condominium
200801
200805
200809
200901
200905
200909
201001
201005
201009
201101
201105
201109
201201
201205
201209
201301
201305
201309
201401
201405
201409
201501
201505
201509
201601

76

58

53

The following maps show the REALTORS ® Confidence Index—Six-Month Outlook across property types by state. 8 Compared to current conditions in the single-family homes market, all states, except for Delaware, Vermont, and West Virginia, were expected to have broadly “strong” to “very strong” markets in the next six months, partly because of the seasonal uptick in spring and summer. In the townhomes market, the outlook varies from “weak” to “very strong” across the states, with “very strong” market outlooks in Colorado and Nebraska. In the condominium market, the outlook is also mixed across the states, with the District of Columbia having the strongest outlook, the only area where the index registered “very strong.”

REALTORS ® have reported difficulty in accessing condominium unit purchase financing for loans insured by both the Federal Housing Administration (FHA) and government sponsored enterprises Fannie Mae and Freddie Mac (GSEs). Only 20 percent of condominiums are eligible for FHA condominium unit financing because of strict eligibility criteria such as those pertaining

7 Respondents were asked “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?”

8 The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Index values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

to occupancy requirements and delinquent dues. 9 In spite of some comments expressing concern about the low oil prices, the respondents in the oil-producing states of Texas, Colorado, Montana, and Nebraska broadly had a positive outlook about conditions in the next six months.

a positive outlook about conditions in the next six months. 9 National Association of REALTORS ®
a positive outlook about conditions in the next six months. 9 National Association of REALTORS ®

9 National Association of REALTORS ® . See http://www.realtor.org/topics/condominiums/condominium-resource-book

REALTORS® Reported Uptick in Buyer Traffic amid Tight Supply While local conditions vary, overall buyer

REALTORS® Reported Uptick in Buyer Traffic amid Tight Supply

While local conditions vary, overall buyer traffic improved in February 2016 compared to one year ago and a month ago. The REALTORS ® Buyer Traffic Index registered at 65 (59 in January 2016; 61 in February 2015). Meanwhile, supply conditions remained by and large tight in many areas. The REALTORS ® Seller Traffic Index registered at 43 (40 in January 2016; 41 in February 2015). An index below 50 indicates that more respondents viewed traffic conditions as “weak” rather than “strong.”

The gap in demand and supply has led to strong price growth against modest gains in income, making a home purchase increasingly less affordable. The national median existing single-family home price in January 2016 was $213,800, up eight percent from one year ago ($197,600). For all of 2015, an average of 89 percent of measured metro areas saw increasing home prices, up from the averages in 2014 (83 percent) and 2013 (88 percent). Meanwhile, incomes have risen at a modest pace of less than three percent annually. 10

The number of permits authorized for new privately owned housing units has been improving and averaged 1.17 million units in 2015. However, 690,084 units, or 59 percent of new construction have been multi-family structures, and 95 percent of the multi-family units are for rental occupancy. 11 Historically, multi-family structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than is historically normal. REALTORS ® reported low inventory of properties in the lower price range and for those that are move-in ready.

10 Source: Average weekly earnings seasonally-adjusted data, Bureau of Labor Statistics, downloaded from Haver Analytics.

11 Source: Census Bureau. Characteristics of Units in New Multifamily Buildings Completed, Units Per Building, 2014.

REALTORS® Buyer and Seller Traffic Indexes as of February 2016 (50 = "Moderate" Conditions) 80
REALTORS® Buyer and Seller Traffic Indexes
as of February 2016
(50 = "Moderate" Conditions)
80
70
65
60
50
43
40
30
20
Buyer Traffic Index
Seller Traffic Index
200801
200806
200811
200904
200909
201002
201007
201012
201105
201110
201203
201208
201301
201306
201311
201404
201409
201502
201507
201512

Measured by the REALTORS ® Buyer Traffic Index, buyer traffic was “strong” in many states but “weak” in some states in the Northeast, Midwest, and South. 12 The slump in oil prices has led to “weak” buyer traffic conditions in North Dakota and Wyoming, while Texas continues to experience “strong” buyer demand.

Texas continues to experience “strong” buyer demand. 1 2 The index for each state is based

12 The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents were asked “How do you rate the past month's buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Index values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

Meanwhile, seller traffic was “weak” across most states, measured by the REALTORS ® Seller Traffic Index. 13

measured by the REALTORS ® Seller Traffic Index. 1 3 REALTORS® Typically Expect Prices to Increase

REALTORS® Typically Expect Prices to Increase By 3.6 Percent in Next 12 Months

Among REALTORS ® who responded to the February 2016 survey, the national median expected price change over the next 12 months was 3.6 percent (3.4 percent in January 2016; 3.4 percent in February 2015). On the one hand, REALTORS ® expect housing price growth to moderate as rising prices have made homes less affordable for many. On the other hand, tight supply is leading to expectations of further price increases.

The map shows the median expected price change in the next 12 months for each state based on the December 2015–February 2016 RCI surveys. Washington, D.C. is expected to post the highest price growth, with the median price expected to increase seven percent, followed by the state of Washington, with a median expected price growth of six percent. REALTOR ® respondents from Oregon, California, Colorado, and Florida also expected strong price growth, with the median expected price growth at four to five percent in each of these states. In North Dakota, Vermont, Connecticut, and Delaware prices are expected to increase modestly, by up to two percent.

13 Respondents were asked “How do you rate the past month's seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. Index values 25 and lower are considered “very weak,” values greater than 25 to 49 are considered “weak,” a value of 50 is considered “moderate,” values greater than 50 to 75 are considered “strong,” and values greater than 76 are considered “very strong.”

Properties on the Market for 59 Days Nationally, properties sold in February 2016 were typically

Properties on the Market for 59 Days

Nationally, properties sold in February 2016 were typically on the market 59 days (64 days in January 2016; 62 days in February 2015). 11 Fewer days on the market are an indication that inventory remains tight. Short sales were on the market for the longest time at 126 days, while foreclosed properties typically stayed on the market for only 57 days. Non-distressed properties were typically on the market for 57 days.

Median Days on Market of Sales Reported by REALTOR® Respondents as of February 2016

200

150

100

50

0

All: 59 Foreclosed: 57 Short sale: 126 Not distressed: 57 All Foreclosed Short sale Not
All: 59
Foreclosed: 57
Short sale: 126
Not distressed: 57
All
Foreclosed
Short sale
Not distressed
201105
201108
201111
201202
201205
201208
201211
201302
201305
201308
201311
201402
201405
201408
201411
201502
201505
201508
201511
201602

11 Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

Nationally, approximately 35 percent of properties were on the market for less than a month when sold. About 15 percent were on the market for longer than six months.

Percentage Distribution of Time on Market of Sales Reported by REALTOR® Respondents as of February
Percentage Distribution of Time on Market of Sales Reported by
REALTOR® Respondents as of February 2016
40%
35%
30%
25%
20%
15%
10%
5%
0%
Less
1 to less
2 to less
3 to less
4 to less
5 to less
6 to less
9 to less
12
than 1
than 2
than 3
than 4
than 5
than 6
than 9
than 12
months
month
months
months
months
months
months
months
months
or more
201502
201601
201602

By state, properties typically sold within a month in the District of Columbia, Colorado, and Alaska. Properties typically sold between 31 and 45 days in Washington, California, Utah, Arizona, Minnesota, Nebraska, Kansas, and Oklahoma. In some oil-producing states which are undergoing slower job growth following the collapse of oil prices, such as Montana, Wyoming, New Mexico, and Louisiana, properties stayed on the market between 61 and 90 days. Texas appears more resilient to the oil price collapse, as properties typically sold between 46 and 60 days. Local conditions vary, and the data is provided for REALTORS ® who may want to compare local markets against the state and national summary.

the data is provided for REALTORS ® who may want to compare local markets against the

II. Buyer and Seller Characteristics

Sales to First-Time Buyers: 30 Percent of Sales

The share of first-time home buyers accounted for 30 percent of residential sales in February 2016 (32 percent in January 2016; 29 percent in February 2015). 12 Continued job creation and the low interest rate environment appear to be sustaining housing demand, but lack of inventory and steep price gains are weighing on sales. First-time buyers, who are likely to have more modest incomes and weaker credit profiles than repeat and older buyers, are also likely to be the most impacted by rising prices.

First-time Buyers as Percent of Residential Market as of February 2016 60% 50% 40% 30%
First-time Buyers as Percent of Residential Market
as of February 2016
60%
50%
40%
30%
30%
20%
10%
0%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602

Sales for Investment Purposes: 18 Percent of Sales

Approximately 18 percent of REALTORS ® reported that their last sale was for investment purposes (17 percent in January 2016; 14 percent in February 2015). At their peak in 2009, investment sales were approximately 25 percent of sales. Purchases for investment purposes have generally been on the decline with fewer distressed sales on the market.

12 First-time buyers accounted for about 32 percent of all home buyers based on data from NAR’s 2015 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

Sales to Investors as Percent of Residential Sales as of February 2016 30% 25% 18%
Sales to Investors as Percent of Residential Sales
as of February 2016
30%
25%
18%
20%
15%
10%
5%
0%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602

Distressed Sales: 10 Percent of Sales

Distressed sales accounted for 10 percent of sales (nine percent in January 2016; 11 percent in February 2015). Foreclosed properties were seven percent of sales, while short sales were three percent of sales. 13 Respondents from New York, which follow a judicial foreclosure process that is typically longer than a non-judicial process, reported more distressed properties in the market. With rising home values and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for about a third to a half of sales until 2012 when they began to fall below this level.

Distressed Sales as Percent of Residential Market as of February 2016 60% 50% 40% Foreclosed:
Distressed Sales as Percent of Residential Market
as of February 2016
60%
50%
40%
Foreclosed: 7%
Short sale: 3%
30%
20%
10%
0%
Foreclosed
Short sale
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602

13 The survey asks respondents to report on the characteristics of the most recent sale for the month.

Cash Sales: 25 Percent of Sales

Approximately 25 percent of sales were all-cash (26 percent in January 2016; 26 percent in February 2015). Buyers of homes for investment purposes, second homes, and foreign clients are more likely to pay cash than first-time home buyers. Among buyers who obtained a mortgage, 37 percent made a downpayment of 20 percent or more.

Cash Sales as Percent of Residential Sales as of February 2016 40% 35% 30% 25%
Cash Sales as Percent of Residential Sales
as of February 2016
40%
35%
30%
25%
25%
20%
15%
10%
5%
0%
200810
200902
200906
200910
201002
201006
201010
201102
201106
201110
201202
201206
201210
201302
201306
201310
201402
201406
201410
201502
201506
201510
201602
Percent of Mortgage Sales With Downpayment of At Least 20 Percent as of February 2016
Percent of Mortgage Sales With Downpayment of
At Least 20 Percent as of February 2016
50%
45%
37%
40%
35%
30%
25%
20%
15%
10%
5%
0%
201104
201107
201110
201201
201204
201207
201210
201301
201304
201307
201310
201401
201404
201407
201410
201501
201504
201507
201510
201601

Former Renters: 38 Percent of Homebuyers

Home buyers who were renting immediately prior to their recent home purchase accounted for 38 percent of sales, about the same as in previous months (40 percent in January 2016; 38 percent in February 2015). Renters are facing challenges transitioning into homeownership including rising rents, which erode their ability to save for a downpayment, and steep house price increases amid modest income gains which are making homes less affordable. According to NAR’s March 2016 Housing Opportunities and Market Experience (HOME) Survey of U.S. households, 63 percent of respondents who currently do not own a home believe it would be difficult to qualify for a mortgage given their current financial situation. 14

60%

50%

40%

30%

20%

10%

0%

Living Status of Homebuyers at Time of Home Purchase as of February 2016 54% 38%
Living Status of Homebuyers at Time of Home Purchase
as of February 2016
54%
38%
8%
201408
201409
201410
201411
201412
201501
201502
201503
201504
201505
201506
201507
201508
201509
201510
201511
201512
201601
201602

Rents an apartment or house201507 201508 201509 201510 201511 201512 201601 201602 Lives in own home Lives with parents, relatives,

Lives in own home201509 201510 201511 201512 201601 201602 Rents an apartment or house Lives with parents, relatives, or

Lives with parents, relatives, or friends201506 201507 201508 201509 201510 201511 201512 201601 201602 Rents an apartment or house Lives in

III. Current Issues

Impact of TRID Regulations on Contract Settlement

The TILARESPA Integrated Disclosure (TRID) regulations which came into effect on October 3, 2015, were intended to provide disclosures that will be helpful to consumers in understanding

the key features, costs, and risks of the mortgage for which they are applying. Toward this end, the new guidelines prescribe timelines for when consumers should receive the Loan Estimate and

the

Closing Disclosure. 15

14 http://www.realtor.org/reports/housing-opportunities-and-market-experience-survey 15 The creditor should deliver the Loan Estimate or place it in the mail no later than the third business day after receiving the loan application. The creditor is required to ensure that the consumer receives the Closing Disclosure no later than three business days before the consummation of the loan. If the creditor provides a new Closing Disclosure, the consumer must be provided with another three-business day waiting period. Guidelines at http://files.consumerfinance.gov/f/201508_cfpb_tila-respa- integrated-disclosure-rule.pdf.

Nearly half of REALTOR ® respondents reported a longer closing period compared to a year ago. Among contracts that closed in February 2016, the median number of days to close a contract was 40 days, up from 36 days in July 2015 when NAR first started tracking this information. To meet the required review of the Closing Disclosure under the new guidelines, respondents have reported writing a 45day closing period into their contracts or extending the usual closing period by one to two weeks.

While there are reports that “TRID is causing delays” and “making transactions difficult,” there are also reports that TRID has been “fairly easy to deal with” and that the TRID rules “aren’t a major problem,” largely because the industry prepared for the changes in the time between announcement and implementation. However, REALTORS ® have taken issue with not being able to have access to the Closing Disclosure. Without access, they cannot quickly review the documents for errors, and delays in catching errors can lead to delays in home closings.

Percent of Respondents Who Reported a Longer Closing Period Compared to a Year Ago

53% 49% 47% 47% 37% 201510 201511 201512 201601 201602
53%
49%
47%
47%
37%
201510
201511
201512
201601
201602

Median and Average Days to Close a Contract

46 44 43 43 41 42 42 41 42 40 40 40 40 36 35
46
44
43
43
41
42
42
41
42
40
40
40
40
36
35
35

201507 201508 201509 201510 201511 201512 201601 201602

43 41 42 42 41 42 40 40 40 40 36 35 35 201507 201508 201509

Median

Average

Contract Settlement Issues: Financing, Home Inspection, and Appraisals are Major Issues

In reporting on their last contract that went into settlement or was terminated over the period December 2015–February 2016, 63 percent of contracts were settled on time, 30 percent had delayed settlement, and seven percent were terminated.

How Sales Contracts Were Settled in December 2015–February 2016*

100%

80%

60%

40%

20%

0%

9% 10% 9% 7% 6% 7% 6% 7% 6% 7% 6% 7% 26% 26% 28%
9%
10%
9%
7%
6%
7%
6%
7%
6%
7%
6%
7%
26%
26%
28%
29%
29%
29%
30%
29%
32%
33%
32%
30%
65%
64%
63%
63%
65%
65%
64%
64%
62%
60%
62%
63%
65% 64% 63% 63% 65% 65% 64% 64% 62% 60% 62% 63% Contract was terminated Contract

Contract was terminated Contract was delayed but eventually went into settlement Contract was settled on time

* Based on the respondent's most recent contract that went into settlement or was terminated during this period.

Among contracts that had a delayed settlement (30 percent), financing, home inspection, and appraisal issues were the primary causes of the delay.

Problems Encountered for Contracts That Were Delayed But Eventually Went Into Settlement in December 2015–February 2016* (Delayed Contracts Represent 30 Percent of Closed or Terminated Contracts)

Issues related to obtaining financing Home inspection/environmental issues Appraisal issues Titling/deed issues
Issues related to obtaining financing
Home inspection/environmental issues
Appraisal issues
Titling/deed issues
Contingencies stated in the contract
Issues in buy/sell distressed property
No problems encountered
Home/hazard/flood insurance issues
Buyer lost job
Other
16%
16%
11%
8%
8%
5%
2%
1%
22%

42%

*Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays,

Among contracts that were terminated (seven percent), home inspection issues were the major case of delay, followed by issues related to the buyer obtaining financing.

Problems Encountered for Contracts That Were Terminated in December 2015–February 2016* (Terminated Contracts Represent Seven Percent of Closed or Terminated Contracts)

Home inspection/environmental issues Issues related to obtaining financing Appraisal issues No problems encountered
Home inspection/environmental issues
Issues related to obtaining financing
Appraisal issues
No problems encountered
Contingencies stated in the contract
Issues in buy/sell distressed property
Buyer lost job
Titling/deed issues
Home/hazard/flood insurance issues
Other
22%
11%
8%
6%
6%
5%
4%
3%

27%

27%

*Based on the respondent's most recent contract that went into settlement or was terminated during this period. Percentages will not sum to 100 percent because multiple responses are allowed. "Other" includes buyer or seller backing out, price disagreement, non-price disagreement, HOA issues, builder delays, etc.

The NATIONAL ASSOCIATION of REALTORS ® , “The Voice for Real Estate,” is America’s largest

The NATIONAL ASSOCIATION of REALTORS ® , “The Voice for Real Estate,” is America’s largest trade association, representing over 1 million members, including NAR’s institutes, societies, and councils, involved in all aspects of the real estate industry. NAR membership includes brokers, salespeople, property managers, appraisers, counselors and others engaged in both residential and commercial real estate. The term REALTOR ® is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS ® and subscribes to its strict Code of Ethics. Working for America's property owners, the National Association provides a facility for professional development, research, and exchange of information among its members, and to the public and government for the purpose of preserving the free enterprise system and the right to own real property.

The Mission of the NATIONAL ASSOCIATION of REALTORS ® Research Division is to collect and disseminate timely, accurate, and comprehensive real estate data and to conduct economic analysis in order to inform and engage members, consumers, policy makers, and the media in a professional and accessible manner.

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