As buyers contend with financing—and finding—a home in their price range, their confidence in their prospects is waning.
In the final quarter of 2018, 34 percent of buyers felt it was ideal to make a purchase, according to the latest National Association of REALTORS® (NAR) Housing Opportunities and Market Experience (HOME) survey—a departure from 39 percent the last quarter and 43 percent the previous year.
What’s more, 37 percent of buyers felt it was not ideal to make a purchase—an increase from 28 percent the prior year.
According to Lawrence Yun, chief economist at NAR, affordability is the culprit, with buyers concerned not only about escalating prices, but also about their ability to get a larger mortgage.
“Consistently fast-rising home prices well in excess of income growth over recent years have left buyers frustrated, while slowly enticing would-be sellers to consider listing,” says Yun.
The disparity is dramatic. From 2012 to 2018, home prices surged 44 percent, according to NAR. The average hourly wage? Sixteen percent.
Buyers have noticed the shift. Overall, 63 percent of respondents to the survey believe homes in their market have risen in value; 67 percent of homeowners and 56 percent of renters feel the same. Forty-one percent of overall respondents, however, believe prices are set to “stay the same.” In November, the country’s median price was $257,700, an increase of 4.2 percent year-over-year, NAR recently reported.
Among aspiring homeowners, 30 percent believe it will be “somewhat difficult” to get a mortgage; 29 percent believe it will be “difficult,” according to the survey.
With the economy and housing linked, 59 percent of respondents believe the economy is improving. The majority of those, paradoxically, reside in the West, where buyer optimism has starkly soured.
“The West region has a strong job-creating economy, yet it is the West region showing the weakest buyer sentiment because the West region is the least affordable,” Yun says.
To head off homebuyers’ struggles, affordable homes are needed, according to Yun, who cites the Qualified Opportunity Zones Program, a provision of the Tax Cuts and Jobs Act, as a possible solution.
“Perhaps some communities designated as Opportunity Zones can draw real estate developers using tax incentives to build affordable housing,” says Yun.
For more information, please visit www.nar.realtor.