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Homebuyers Concerned, Not Deterred

The latest report from the National Association of Homebuilders (NAHB) suggests prospective borrowers might be discouraged by the state of today's market, which includes high prices, intense competition, and a shortage of available, affordable inventory. Still, some 17% of Americans plan to purchase a home within the year, according to NAHB's Housing Trends Report (HTR), covering data collected June 16-20. The last, and only, other time the share of prospective buyers stood at 17% was in the first quarter of 2018, the researchers noted.

The organization's research team surveyed those who said they were looking to buy a home in the coming year about their perceptions of the housing market. Rose Quint, NAHB Assistant VP for survey research summed up some highlights from the report.

"In the first quarter of 2018, the starting point of the Housing Trends Report (HTR), only 16% of buyers expected easier availability for a home in the months ahead," noted Rose Quint, NAHB Assistant VP for survey research. "The share soared to 36% by the final quarter of 2020 (during the COVID-19 pandemic), but then went on to decline to 33% and 28%, respectively, in the first two quarters of 2021. Now, 64% expect that finding the right home will be harder or not change much, up from 54% in the last quarter of 2020. This shift in buyers’ perceptions on inventory correctly reflects the scarcity of homes available on the market in the first half of 2021."

She went on to explain some of the findings about homebuyers' perceptions related to affordability.

"In the final quarter of 2019, a series-high of 82% of prospective buyers could afford less than half the homes available in their markets. The share went on to decline throughout 2020 (i.e. affordability perceptions improved), reaching 63% by the final quarter of that year. But affordability expectations have worsened recently. In the first and second quarters of 2021, the share who can only afford less than half the homes in their markets rose again, to 65% and 71%, respectively. The increase is new evidence that rising home prices have begun to have a stronger effect on perceptions of affordability than still-relatively low mortgage rates," Quint said. "Affordability expectations have worsened in every region of the US. From the final quarter of 2020 to the second quarter of 2021, the share of buyers who could afford less than half the homes for-sale in their markets rose 51% to 66% in the Northeast, 74% to 83% in the Midwest, 68% to 75% in the South, and 61% to 70% in the West."

The report also revealed a high and increasing share of first-time buyers—a 56% share in the third quarter of 2020 increased each quarter hitting 64% this past quarter. The share of millennials planning a home purchase jumped from 19% to 29% in Q221. Among Gen Z buyers, it rose from 14% to 21%. Gen X and Boomers did not change much during this period.

The study also examined whether would-be homeowners wanted a newly built home or an existing home. They found new-home seekers peaked in 2020's fourth quarter before falling to 38% in Q121 and to 33% in Q221.

"The drop is directly related to strong gains in new home prices in 2021," the researchers noted. In addition, the share who will buy either new or existing rose from 27% in Q420 to 32% in Q221, while the share looking only at existing homes rose from 31% to 35%.

What do those who cannot land a home in 2021 plan to do about it? 42% (down from 52% last quarter) will "continue looking for the right home in a preferred location." About 29% will buy a more expensive home, which is up from previous reports. The share who plan to give up their home search until next year or later reached a series high of 28% in Q420, but then declined for two consecutive quarters and now stands at 20% in Q221.

Quint  pointed out recent National Association of Realtors data suggesting the inventory crunch could be easing up, as the stock of unsold homes rose 3.3% to 1.25 million from May to June 2021.

"Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes ..." said Lawrence Yun, NAR's Chief Economist.

NAHB's full NAHB report is available at eyeonhousing.com, and another summary is published on the NAHB website.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others. Contact Christina at [email protected]

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