How Housing Affordability Challenges Are Hampering Home Buying

How Housing Affordability Challenges Are Hampering Home Buying

Housing affordability has continued to be a challenge for the housing market as it grapples with a lack of inventory, due in large part to five key factors: labor, land or lots, lending, lumber, and other material costs, and laws and regulatory burdens. COVID-19 has exacerbated a number of these factors — notably material costs and labor shortages — and kept inventory low, which have caused housing prices to soar and priced numerous Americans out of purchasing a home.

Losing Home Buyers

According to recent research from the National Association of Home Builders (NAHB), higher mortgage rates and double-digit growth in home prices are discouraging a growing share of buyers from engaging in the purchase process. At its peak in mid-2021, 61% of prospective buyers were actively trying to find a home to buy; that share has dropped back to pre-pandemic levels at 46%. This article goes into depth on how a growing number of prospective home buyers aren’t moving past the planning stage.

The Long Wait

Of the buyers who were actively engaged in the process of finding a home in the first quarter of 2022, 67% have spent 3-plus months searching for a home without success. Although the majority will continue to search for a new home, a growing segment of prospective home buyers are choosing to wait. According to NAHB’s latest Home Trends Report, the share of prospective buyers postponing their home search until next year has risen steadily from 20% in the second quarter of 2021 to 25% in the first quarter of 2022.

Chief among this segment are first-time home buyers. Their share of prospective buyers has fallen from 65% in the third quarter of 2021 to 60% in the first quarter of 2022 — or roughly the same level as prior to the pandemic. This is of particular concern, as home buying can be a key factor in building wealth.

Although some buyers may be willing to pay more for a new house, the share of buyers who can afford half or more of the homes on the market is down to 19%, after peaking in the fourth quarter of 2020 at 37%. Affordability concerns have risen in every region of the country, with the largest jump occurring in the Northeast.

To get involved with NAHB’s efforts to combat housing affordability and provide homeownership opportunities, contact our Executive Director, Stephanie Stipins @𝐬𝐭𝐞𝐩𝐡𝐚𝐧𝐢𝐞@𝐟𝐨𝐫𝐭𝐬𝐦𝐢𝐭𝐡𝐡𝐨𝐦𝐞𝐛𝐮𝐢𝐥𝐝𝐞𝐫𝐬.𝐜𝐨𝐦. Or become a member, to get your voice heard.