Housing Affordability Beginning to Raise Red Flags
Affordability continues to be the biggest problem that homebuyers face.
According to the 2022 Obstacles to Home Buying report, issued today by the National Association of Realtors (NAR) in partnership with Morning Consult, record-high home prices and record-low inventory have made the home buying process exceedingly difficult.
“Our new study shows that while the inventory crisis is affecting potential buyers of every race, nearly all home buyers agree that homeownership is still an important part of the American Dream,” said Jessica Lautz, NAR vice president of demographics and behavioral insight.
Last month, the NAR reported that existing-home sales fell 7.2% from January to a seasonally adjusted annual rate of 6.02 million in February. But the median cost of existing single-family homes jumped up 15.5% for the period.
Findings from the new report show the second-ranking obstacle faced among potential Hispanic buyers was difficulty in saving for a down payment. For potential Black home buyers, lack of credit or credit issues was the second-highest concern, while for White and Asian potential buyers it was a lack of homes that fit their criteria.
“In the current hot market, people who have traditionally enjoyed homeownership can capitalize on those gains to realize new opportunities,” said Bryan Greene, NAR vice president of policy advocacy. “Meanwhile, the market becomes increasingly unaffordable, and the obstacles greater, for those trying to enter the market.”
Approximately three-quarters of potential home buyers are currently planning to save for a down payment, which most noted will take between six months and three years, the NAR reports.
Among buyers who were successful in attaining homeownership, the new report found Asian respondents (51%) were more likely than White (32%), Hispanic (35%), or Black (33%) respondents to say a lack of affordable homes was an obstacle in their home purchase.
The second-biggest obstacle White and Asian buyers faced was competing with multiple offers, while for Black buyers it was finding neighborhoods in which the buyers were comfortable.
The situation could become even more difficult in the coming months as inflation looms over housing and the overall economy.
“Inflation continues to kick higher with an 8.5% consumer price rise in March,” NAR Chief Economist Lawrence Yun said in a statement issued by the association this morning. “Aggressive inflation will force the Federal Reserve to raise interest rates multiple rounds this year and actively pursue quantitative tightening.”
The rise in inflation for March was the highest since December 1981.
Yun notes that higher mortgage rates will result in declining home sales in the month months. It could also slow down price appreciation. The economist projects a 10% drop in home sales for 2022 along with a 5% price gain by year’s end.
Additional economic increases include rents rising by 4.4%, hotels charging 29% more, gasoline prices up 48%, and energy prices rising by 24% compared to a year ago.