Buyers are becoming increasingly wary about the investment value of buying a home. They're also uncertain about just how to react to current home-price trends. After many years of rapid and predictable home-price increases, those values have leveled off considerably. Overall, the national average price of single-family homes rose about 3.5 percent during the past 12 months. In certain regions, however, prices didn't go up at all, while in a few areas values actually declined. In California, where home prices are the highest in the country, appreciation rates have been negative (lowering values) in several major markets, such as San Francisco and San Jose. One of the highest-priced areas is the Anaheim-Santa Ana market. Here, home prices fell about 3 percent last year. On the other hand, prices rose sharply in some Eastern metropolitan markets, such as New York City and Boston.
While a key element in the investment value of real estate is still location, property type is also important. Specifically, well-planned and energy-efficient single-family homes, as indicated by pricing trends, are now strong.
Condominiums have appreciated in value at a much lower rate than other types of residential units during the past year. Special-use condos, such as those in ski-resort areas, have decreased in value by as much as 25 percent in some cases.
Such negative trends, however, could be turning around at this point. After declines in the number of home sales for six consecutive months, a substantial boost in sales was noted during the last two months of 1984, according to a report by the National Association of Realtors (NAR).
A significant reason for the increasing sales, which are continuing into 1985, is the gradual reduction in mortgage interest rates. The resurgence in sales activity and more favorable financing could support home-price increases in the coming months.
Another bullish sign is the increasing affordability of today's homes for the average American family. NAR's ``affordability index'' now stands at about 85.6 -- the highest level in several months. The index figure means that a family earning the median income had 85.6 percent of the income needed to qualify for a mortgage on a median-priced resale home (based on qualification guidelines set by the Federal National Mortgage Association).
Location is still the top-priority consideration by most buyers when selecting a home, according to a national survey of brokers conducted by Opinion Research. Some 61 percent of all brokers surveyed named it as the primary concern of today's home buyers.
Second on this list of top concerns was the condition, appearance, and amenities of the home (30 percent). Financing availability was third at 25 percent; and price fourth at 19 percent.
Interestingly, home buyers in different parts of the country seem to place their key considerations in a different order, according to the survey. In all areas it was agreed that location is at the top, but buyers in the Western states place financing availability in second place, appearance third, and price last.
Another significant trend this year is the increasing frequency of nonmarried couples buying homes. The survey indicated that about 59 percent of the brokers feel that co-ownership of homes is gaining in popularity, a trend most common in the Northeast.
The reasons, according to brokers, are these: (1) increasing social acceptance of the practice, (2) changing life styles, and (3) the need for two incomes to purchase a home in the current market.
The continuing co-ownership trend surprises many real estate professionals, considering the problems that often surface, such as disagreement on property selection and difficulties in selling the home when a breakup occurs.
Retirees are also changing their home-buying priorities, according to the Center for Social Research on Aging at the University of Miami. There appears to be a shift in the area in which they establish a new home when retirement time rolls around.
At this point, the most popular states for settling-in to a new retirement residence are Florida, California, and Arizona, in that order. But California is losing its grip on the retirement market, the report says. By 1990, the Golden State will probably drop to third place, behind Arizona. Other seemingly unlikely states will become more frequent destinations, such as Washington, Oregon, and North and South Carolina.
Home-buyer attitude and actions are continually evolving. Strong trends that impact the 1985 market may be out of date in 1986. One motivating factor, however, remains constant: Most Americans want to own their own home.