If there’s one market that has been sent into a tailspin by the pandemic, it’s the housing market. Low interest rates in 2020 and 2021 led many to rush buying and the price of homes skyrocketed, raising rental rates with it. As the Federal Reserve continues its interest rate hikes into 2023 in attempts to stabilize the market, latest poll data indicate that consumers looking to buy are treading lightly, especially first-time buyers.
When it comes to plans to purchase a home, CivicScience tracking finds that half of prospective buyers plan to buy either within a year or in one to two years. Yet those who plan to buy within a year’s time has fallen from December 2021 (31%) to 27% today. Subsequently, those who who will wait five or more years increased from 28% in December 2021 to 32% in December 2022.
Those shifts align with reports of declining home sales, and further suggest that a growing number of potential buyers may be willing to wait several years to purchase (or perhaps until they feel confident that the market has reached a better place).
Prospective Buyers Weigh In
A cocktail of factors are influencing homebuying at the moment: interest rates have more than doubled since the start of the year (from 3% to 6.5% at time of writing), but home prices remain high, while there is a reported shortage of available homes stemming all the way back to the housing crisis of 2007-8.
While the prices of homes are gradually falling, perhaps not fast enough for most prospective buyers to feel comfortable purchasing at current interest rates. Nearly 3-in-10 consumers in the market continue to report that home prices are the leading reason holding them back from buying right now, according to CivicScience December data. That’s followed by high interest rates (22%) and lack of affordable houses on the market (14%). Concern over home prices has noticeably fallen compared to May 2022, however U.S. adults in the market are now twice as likely to cite high interest rates as the top deterrent for making a purchase.
Additionally, data from May indicated that consumers were three times more likely to postpone buying a home than to fast-track buying one due to rapidly rising interest rates from the Fed at the time. Interest rate concerns continue to be a barrier. All-in-all, 42% of those in the market say mortgage rates have led them to delay purchasing a new home. Likewise, 45% report they have had difficulty finding a home they can afford.
First-Time Buyers Are Feeling Priced Out
Things look especially tough for first-time buyers, who are more likely to be under age 35. More than 3-in-4 say that they’ve had problems finding an affordable home recently, compared to around 1-in-2 homeowners in the market. First-time buyers are nearly equally likely to be dissuaded by rising mortgage rates, while current homeowners looking to buy are less affected.
Other insights from the data:
- Looking at age, adults under age 35 are eager to purchase homes – more than a third of the age group intend to purchase one within a year or less, which is more than twice that of Americans 35 and older in the market. However, nearly half of these young adults cite high prices or interest rates as the main reason holding them back.
- Earners across all income brackets say they are delaying purchasing a home due to interest rates, prices, availability, or other reasons, yet middle to upper income earners ($100K+ annually) are willing to wait the longest (5+ years) to make a purchase. Income raises aren’t likely to speed the homebuying process for many – data show more than 50% of Americans in the market who are expecting income raises within the next six months report they are still being held back by interest rates and home prices.
- Among Americans in the market to buy a home, renters are the most likely to cite high home prices as the leading deterrent (32%), while current homeowners are the most likely to cite interest rates (29%).
CivicScience will continue tracking housing market trends. Check back for updates and insights, or book a demo to learn more about how our clients benefit.