In order to better understand the sentiment and experiences of buyers, sellers, and renters currently on the market for homes, the Realtor.com Economics team has conducted a randomized survey of visitors to listing and search result pages in their latest report. In recent months, Realtor.com has tracked how market players are responding to the current real estate refresh, and seeing the ways in which the market has and has not reverted to “normal” conditions.
- High listing prices and high mortgage rates lead 34.5% of buyers to report budget challenges in their homebuying experience.
- The share of buyers who report being overbid on a home has decreased as the market has begun to correct itself.
- Buyers are increasingly targeting homes in other states and smaller towns in a search for affordability.
- 40.5% of all buyers and 45.3% of first-time buyers believe the U.S. is currently in a recession, and recession perception is increasingly affecting when buyers are looking to make a purchase.
There has been no shortage of adversity for homebuyers in 2022. For 36 consecutive weeks, year-over-year listing price growth has been in the double digits and mortgage rates have hovered around or above 5% since April. The alternative hasn’t been much more appealing, as nationwide rent has reached new record levels for 17 months in a row. It’s no wonder that 34.5% of all buyers and 40.5% of first-time homebuyers in our survey report that their budget has been a challenge to their homebuying experience. Access to financing is also a concern, as 9.5% of all buyers and 19.3% of first-time buyers report credit score issues interfering with their plans to buy a home. Uncertainty has also made its way into the minds of buyers, as 31.8% are now unsure of when they want to buy.
One way in which homebuying has gotten easier is in the level of competition buyers face. Just 9.4% of buyers report being overbid, down from the peak of 12.6% in April and back in line with the responses from early 2021. Again, though, first-timers are having more problems on this front, as 12.2% report being overbid.
These responses are consistent with changes we see in the market at large. The share of listings that have seen their price reduced has almost doubled year-over-year, and the number of days a listing spends on market has started to rebound from an all-time low a few months ago. According to Realtor.com Senior Economic Research Analyst Joel Berner, even though this issue is on the decline, it remains much more prevalent than it was prior to the pandemic —when the share of respondents reporting being overbid hovered around 4%.
Budget challenges have many home shoppers searching for smaller homes. Some 8.4% are looking for condos or apartments to buy, reflecting the highest share since January of 2019. Realtor.com's most recent quarterly cross-market demand report revealed that the share of shoppers searching for listings in other states has reached an all-time high, and their latest survey suggests that trend will continue. An estimated 33.6% of buyers are looking to buy in another state this July, the highest in survey history.
Not only are home shoppers more likely to search cross-country and away form metros, they’re more likely than ever to be looking at smaller markets. Nearly 50% of respondents report that they are looking to buy a home in a small town or rural area, back in line with the peak levels of August and September 2020. This coincides with new Realtor.com research into the top emerging housing markets in the first half of 2022, where we found that a search for affordability is leading homebuyers to heat up the markets in places like Elkhart-Goshen, Indiana, which came in as the top market on our list and is a mainstay in our hottest markets. Just 12.6% of buyers are targeting urban areas, down from 15.4% in February; and just 32.2% are targeting suburban areas, down from 36.4% in March.
Buyer Economic Perceptions
"Economic research, the news, and casual conversations are full of speculation about whether or not the US economy is currently in a recession or if one is on its way," according to Berner. However, despite strong employment reports in recent months, inflation has a strong grip on American consumers and wage growth has not kept up, leaving millions in a tighter financial position than they have been in years.
Realtor.com's recent survey attempts to quantify this effect by asking questions about the timing of the next economic downturn and the decisions related to homebuying that it will impact. As a baseline, in December 2019, 46.1% said a recession was a year or more off, while 14.3% said that we were currently in a recession.
The COVID-19 pandemic changed this drastically, and in June 2020 just 10.1% thought that a recession was more than a year away, while 53.9% thought that one was underway. A year ago, the recovery moderated these responses, with 27.1% responding that a recession was more than a year off, and 31.3% responding that the economy was currently in a recession.
On the contrary, recent months have seen a re-souring of economic outlook. In July 2022, just 12.9% of the buyers surveyed said that the next recession would not happen for at least another year, while 40.5% said that a recession was already happening in the U.S. June and July saw the two biggest month-to-month jumps in the share of respondents indicating their belief that the US economy was in a recession since May 2020. First-time homebuyers are slightly more pessimistic, with 45.3% reporting that they believe a recession is underway.
Buyer behavior may be becoming more sensitive to perceptions about the state of the economy. Just 42.2% of respondents report that an economic downturn will have no effect on their decision to buy a home, down from 46.6% last year and 51.2% in December 2021. Buyers are more likely to respond to the state of the economy, but the direction of their response is mixed. The share of surveyed buyers saying that a recession will make them more likely to purchase a home is up to 27.1% from 24.7% last year, and the share responding that it will make them a lot less likely to purchase a home is up from 5.0% to 6.5% year-over-year.
Respondents’ current perceptions of the economy also impact their response to it. Among those who say the U.S. is currently in a recession, 45.8% say it will have no effect on their decision to purchase a home, and 24.2% say it will make them more likely to purchase a home. No matter how recession concerns ultimately impact decision making, there are moves that consumers can make to prepare to weather a potential recession.
To read the full report, including more charts and methodology, click here.