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Share of Prospective Homebuyers Waiting for Market Conditions to Improve Declines

Prospective homebuyers’ patience may be waning, with fewer willing to wait until home prices or interest rates come down to purchase a home, according to new data from the Bank of America (BofA) Homebuyer Insights Report.

The report showed that some 62% of respondents are willing to wait for prices and/or rates to fall before buying a home, down from 85% just six months ago. And they seem to be taking action. Sales of new single-family houses in September 2023 were a seasonally adjusted 759,000, up from 679,00 sales in April 2023.

“When it comes down to it, if buying a home is your goal and within your budget, the best time to buy is when you’re ready financially and you can find a home that fits your needs,” says Matt Vernon, Head of Consumer Lending at BofA. “Even in the current interest rate environment, there are clear benefits to purchasing a home and beginning to build equity.”

This latest research also explores what buyers would be willing to forgo in order to buy sooner, and what would motivate current homeowners to sell.

Approximately 80% of outstanding U.S. mortgages have an interest rate below 5%. This gives homeowners an incentive to stay put because the average 30-year fixed mortgage rate hit 8% in October of this year. Younger people, Millennials in particular, are being hurt disproportionally by this trend, according to Bank of America Institute’s newly released Housing Morsel.

The rate disparity is compressing the already limited supply of houses for sale, and begs the question: What does inspire homeowners to sell and free up inventory for would-be homebuyers in today’s environment?

What Would Make Homeowners Sell?

Half of current homeowners say they’d be prompted to sell if their dream home became available (50%) and/or if they found a more affordable area (54%) – even if it meant paying a higher interest rate for a new mortgage. Additional motivations for some, but not as many, to move and give up their current mortgage rate include:

  • Job opportunity or job relocation – 40%
  • Nicer neighborhood amenities – 40%
  • The need for a larger home or more rooms – 38%
  • A social community to be a part of – 32%
  • A desire to be adventurous and move to a new area – 28%
  • Moving to a home with rental potential – 21%

In fact, millions of people are moving to areas, including the Sun Belt, where they can afford to buy a home. Those surveyed say the following could or already has motivated them to move from one state to another:

  • Cost of living – 60%
  • Career/job reasons – 44%
  • Family and relationships – 37%
  • Affordability of housing– 33%
  • Safety concerns – 27%
  • Retirement – 25%
  • Adventure and exploration – 20%

Work-related reasons may also inspire homeowners to sell in this market, and work is a major driver of out-of-state moves. Those who have or would move to a new state for their careers are driven by increased job opportunities (57%), job requirements to relocate (29%) or the fact that they can work remotely and are no longer tied to an office (28%).

Overall, regional labor market dynamics and migration trends are closely correlated, according to Bank of America Institute. Internal Bank of America data found that of the 26 Metropolitan Statistical Areas (MSAs) tracked, Boston and Portland, OR, are more likely to see inward migration due to job changes and cities such as Austin, San Antonio, Las Vegas and Tampa saw the biggest population inflow during Q3.

What is more, relocating workers seem to be getting bigger pay increases than those who stayed in the same MSA.

Willing to Sacrifice

With inventory scarce, the Homebuyer Insights Report also explored how prospective buyers are adapting. The report found those surveyed would give up specific home features to increase their chances of finding a home in the year ahead. Notably, there are some differences in what older and younger generations are willing to sacrifice in order to buy a home.

Gen Z (15%) are less likely to give up space than baby boomers (40%). However, Gen Z (24%) would sooner compromise on location, including proximity to work, schools, and amenities than baby boomers (6%).

Across all generations, would-be buyers are most likely to give up the following if it increased the chances of finding a home to purchase:

  • A brand-new home – 35%
  • Being near family – 33%
  • Public transportation access – 32%
  • Historical charm – 31%

Homeownership Lays the Foundation for Financial Success

This survey asked participants if they view homeownership as a top indicator of success. Here’s how homeownership stacked up against other key markers of success in life:

  • Being healthy physically and mentally – 71%
  • Personal growth and development – 65%
  • Having strong relationships and connections with friends and family – 63%
  • Having a good work-life balance – 58%
  • Homeownership – 48%
  • Career fulfillment – 46%
  • Building a family – 46%
  • Reaching a certain amount of money in savings/investments – 43%
  • Contributing/supporting causes that are important to a person – 35%

However, homeownership tops the list of how respondents define financial success (53%), according to those surveyed. Also important: saving enough money for an emergency fund (50%), paying down debt (45%) and being able to retire early (43%).

Nearly two-thirds (63%) of these homeowners said owning a home is one of their greatest personal achievements – more than raising a family (50%), being in a committed relationship (32%) and/or overcoming a significant challenge (25%).

Respondents continue to see homeownership as a reflection of significant achievement and driver of wealth creation that can help them build equity over time:

  • An estimated 91% of respondents say they perceive their home more as a valuable investment than as a financial liability.
  • Approximately 89% of respondents say they think about the financial security, rather than the financial risk, of owning a home.
  • Some 90% of respondents say home is a place to make memories and share experiences rather than just a place to live.
  • Roughly 81% of respondents say they think of owning a home as liberating rather than confining.

“There’s a clear desire for homeownership, but for some, it has become more challenging to achieve due to current market realities,” said Vernon. “That’s why we are committed to offering affordable homeownership solutions, which include grants to help homebuyers with their down payments and closing costs, with no repayment required.”

To read the full report, including more data, charts, and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].
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