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Worst Housing Affordability in 40 Years?

According to new research from the National Association of Realtors (NAR), the current levels of home prices, mortgage rates, and inventory levels are the top reasons potential buyers across races and ethnicities are choosing to forgo buying a home until affordability gets under control. 

The NAR—in partnership with the Morning Consult—has published the 2023 version of its “Experiences & Barriers of Prospective Home Buyers Across Races/Ethnicities Survey” which surveyed white, Hispanic/Latino, Black, and Asian prospective home buyers about their experiences. 

In addition, NAR’s 2023 “Experiences & Barriers of Prospective Home Buyers: Member Study” which focus on residential real estate regarding the latest buyer with whom they worked who has not yet purchased a home, and it compares findings with the prior consumer study. 

"Home buyers face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates," said Jessica Lautz, NAR's Deputy Chief Economist and VP of Research. "The impact is exacerbated among first-time buyers who are more likely to be from underrepresented segments of the population." 

Among prospective home buyers, Asian (27%), Hispanic (24%), Black (20%) and White (15%) respondents say the main reason they have not yet bought a home is because they are waiting for prices to drop. White respondents (15%) are just as likely to say it is because they are waiting for mortgage rates to drop. Additional market-related reasons that prospective home buyers cite as barriers include waiting for mortgage rates to decline (18% - 25% of all four groups) and not enough available homes within their budget (19% - 24% of all four groups). 

The top three reasons why Realtors say buyers have not yet purchased homes are the same as reported by consumers: not enough homes available for purchase in buyers' budgets (34%), buyers are waiting for mortgage rates to drop as higher prices affect affordability (18%) and buyers are waiting for prices to drop (9%). These three factors greatly impact affordability since limited inventory drives up home prices and higher rates increase monthly mortgage payments. 

Likewise, more than half of Realtors (53%) say that at least one issue is holding their latest buyer back from saving a competitive down payment: most likely current rent or mortgage payments (23%) or credit card balances or payments (17%). Further, only 23% of Realtors say that their buyers experiencing these challenges have applied for down payment assistance programs. This is most likely because their income is too high (30%), they did not know enough about the programs (19%), or they are worried about the competitiveness of their offers in multiple-bid situations (17%). 

"Down payment assistance programs often fly under the radar for potential home buyers. Using programs—like FHA, VA or USDA loans—can make homeownership more attainable. Experts, such as agents who are Realtors, can educate potential buyers about these programs. Doing so will bring in more first-time buyers and narrow the racial homeownership gap," added Lautz. 

Click here to see the combined findings of both reports. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].

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