New research by the National Association of Realtors suggests that 2003 “marks a milestone in the technological evolution of the real estate industry.” For the first time ever, according to NAR, more American home purchasers used the Internet as a key information source than used newspaper advertisements. Fully two-thirds of all recent home purchasers in the first half of this year used the Internet to search for their home versus just 49 percent of buyers who reported using traditional newspaper ads.

Compare this with 1995, NAR says, when barely two percent of home buyers used the Web. Growth in online tools has been so significant that it is now just four percentage points behind yard signs in frequency of use by consumers searching for houses. Sixty-nine percent of recent purchasers in the NAR survey said yard signs were an important factor in alerting them to homes available for sale versus sixty-five percent who cited the Internet.

But no information source came even close to real estate agents--identified as the number one source by a record 86 percent of buyers in 2003, up sharply from 79 percent in 2001. Other top information sources cited by purchasers polled in NAR’s 2003 “Profile of Home Buyers and Sellers” include:

• Open houses - 48 percent.
• Home builders - 37 percent.
• Home books or magazines - 35 percent.
• TV - 22 percent.
• Relocation company - 14 percent.

NAR’s study, conducted among a statistically representative sample of recent buyers and sellers nationwide, found that the Internet now accounts for 11 percent of all home purchases. That is, 11 percent of all buyers say they “found their home on the Internet.” Modest though that may sound, it represents a major leap from just 4 percent in 1999 and 2 percent in 1997.

Internet users tend to be married (60 percent versus 55 percent of non-Internet users), and younger (median 38 years of age versus 47.) They also tend to use realty agents or brokers for the home purchase transaction more frequently than non-Internet users (78 percent versus 68 percent.) And, perhaps surprisingly, they tend to take longer periods of time to complete their home searches (8 weeks on average versus 5 weeks for non-Internet users.)

NAR analysts are not certain why this should be so, but theorize that Internet-savvy purchasers may start their formal search “earlier in the home buying process,” or simply are more thorough in their research.

“There is some evidence,” according to the NAR study, that Internet searchers investigate a wider array of prospective properties before making up their minds than non-Internet users. Internet shoppers studied 12 homes before making their purchases versus an average 7 home for non-Internet shoppers. Nearly one third of Internet home shoppers visited 20 or more properties, and 16 percent visited 25 or more.

Published: July 28, 2003

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.