Real Estate Research: Local Dynamics, National Trends

November 13, 2012

Some of the big recent trends in housing markets — including the rise of all-cash buyers, changes in foreclosure rates, and the recent shortening in time on market — can play out very differently at the local level depending the nature of the area.

That's what two of the country's top real estate academics told REALTORS® Saturday, Nov. 10, in a session that covered new research that was released at the 2012 REALTORS® Conference & Expo. The Center for Real Estate Research, part of REALTOR® University, funded "Changing Dynamics of Recent Home Buyers and Home Sellers," a study that was conducted by Grant Ian Thrall, Ph.D., a professor at the University of Florida, and Thomas Springer, professor of finance and real estate at Clemson University.

Nationally, you would expect foreclosures to be mainly a problem for households with lower credit scores, and in Birmingham, Ala., that's the case, says Thrall. Data he analyzed showed households in that city facing foreclosure correlated closely with credit scores on the lower end of the spectrum.

But in San Francisco, where income and home prices are higher, the foreclosure problem correlated with households with far higher credit scores, suggesting a very different demographic of home buyers who bought during the housing boom.  

Foreclosure rates also differed based on what Thrall called psychographic data, which is collected by credit reporting companies like Experian. Among other things, the foreclosure rates for households that buy homes in walkable communities is far lower than for households that buy in more sprawling communities. Walkable communities are those in which households live in close proximity to services and public transportation.

In addition, time on market should decrease in correlation with improvements in employment — and at the national level, that's what happens, Springer explained. At the local level, though, that doesn't always take place. Time on market tends to behave the way you would expect in larger cities with more economic churn: more volatility in employment, more volume in home sales, and higher prices for real estate. But in cities with less economic churn, including more stable employment, decreases in time on market did not correlate with improvement in local employment.

-- Robert Freedman, REALTOR® Magazine