The Most Important Thing
Homebuyers value price, but it's not all they consider
By Charles Scutt CTW Features

The dollar sign at the bottom line may be the most important factor driving a homebuyer's decision to purchase, but it's certainly not the only criterion influencing their choice, according to a recent nationwide survey commissioned by the National Association of Home Builders.

Results of the poll of 2,000 households, published in late 2006, indicate that the main considerations potential home purchasers consider are the property's price - ranked No. 1, with 80 percent citing its significance - followed by the potential for the new home to increase in value (71 percent), the prospect of selling their existing home at a fair price (70 percent), the mortgage interest rate level (69 percent), and personal life changes, including the birth of a new child or a job switch (60 percent). Jill Heineck, associate broker with Heineck & Company/Keller Williams Realty First Atlanta, says that she's not surprised by the survey's high-ranking results.

"Price is always the starting point when consumers go to buy something, but purchasing decisions ultimately reflect personal needs and desires," Heineck says. For example, "If a family needs a house before the school year begins but doesn't feel financially confident, they'll still buy a home, just one priced cheaper relative to other homes on the market at the time."

The top answers revealed in the NAHB survey are consistent with research conducted by Jim Belfiore, president of Belfiore Real Estate Consulting, Chandler, Ariz.

"Money is always going to be the primary focus in purchasing a big ticket item like a home," says Belfiore. "Price, value, difficulty in selling existing homes, and mortgage rates are the issues being highlighted in the media, and the issues people are talking about with friends, which is why they are the top issues in this survey."

In the current real estate market, a home's price will undoubtedly make or break a buyer's decision to go for it - especially when it comes to new construction, says Belfiore.

"Most markets across the country have experienced deteriorating market conditions during the last 18 months," he says. "Home builders have been forced to cut prices in many markets on numerous occasions. As buyers have seen this, they've become fearful of purchasing. Cancellation rates have increased significantly, in some markets by as much as 50 percent."

Consequently, "buyers now seeking a new home are seeking the most "value-oriented" home - with as much square footage as they can purchase - at the lowest price available," Belfiore says. "These buyers are not discriminating based upon community amenities or standard features within competing communities or homes. They are purchasing based upon a square-footage price, believing that the risk of the price falling after they have purchased is less than if they had purchased a higher-priced home."

To learn what was most important to his clients, Belfiore's firm completed its own comprehensive survey earlier this year that included exit-interview feedback from potential buyers who visited three national homebuilders. The results showed that amenities in and near communities were a major reason for purchasing decisions, Belfiore says. The top community amenities desired were parks (selected first by 26 percent of respondents) and schools (17 percent). The top "area" amenities - those found in the immediate area of where these respondents were purchasing - were grocery stores (29 percent) and other retail outlets (27 percent).

"These answers highlight that buyers are making a decision based upon quality-of-life issues," he says. "They want close, convenient retail services. And they want a place of recreation and good schools within their community."

Speaking of quality schools, Heineck was taken aback that the issue of education was absent from the NAHB's survey responses.

"In metro Atlanta, there is a virtual cottage industry built around helping prospective home buyers measure the quality of schools in various neighborhoods," she says. "Children reaching school age is a life change that often triggers decisions to buy homes."

Additionally, contrary to popular opinion, the length of a person's commute between home and work "plays less of a role in their purchasing decision than one would think," Heineck says. "In our market today, buyers are placing more emphasis on value than average commute times. For example, if given a choice between a $250,000 townhouse located 15 minutes from work and a four-bedroom single-family home more than 35 minutes away, buyers inevitably choose the single-family house."

The NAHB survey also suggested that the news media didn't greatly influence most buyers' decisions to purchase: Only 19 percent of respondents indicated that it played an important role, and 48 percent said it had no influence at all.

"Reading about real estate, like reading romance novels, is very different from actually entering the market," says Heineck.

"Moreover, real estate stories targeted at a mass audience tend to focus on broader market trends. Home buying is a personallevel experience. If you want or need a home, you're going to dive into the water regardless of whether you've heard reports that it may be cold."

Ultimately, Heineck says that consumers and real estate experts alike should interpret the NAHB results with caution.

"There is undoubtedly a gap between contemplation of what decisions drive home buying and having one or more of these factors actually push you into the market - a gap between a person's gut response to questions on a theoretical level and actual decision making in the real world. In all likelihood, many of those surveyed were not currently experiencing a personal life change.

My experience tells me that personal life changes should be higher on the list."