Better Affordability Brings More Buyers

 The first quarter of 2023 saw 56% of prospective home buyers actively in the process of purchasing a home. This is up from the fourth quarter of 2022 at 46%. This is due to the improved affordability expectations.

With the improved affordability, buyer demand is up as well as the competition. Unfortunately, this leads to potential buyers having a harder time finding the home of their dreams. In fact, 71% have spent 3+ months searching for a new home which was up from the 65% reported in the fourth quarter of 2022.

As for each region, the number of prospective buyers actively looking for a home rose in every region in the first quarter of 2023. The Northeast went from 50% to 63%, Midwest from 42% to 45%, the South from 47% to 51% and the West from 44% to 66%.

These results are derived from the Housing Trends Report (HTR). This report is produced by the National Association of Home Builders’ Economics team. The team measures prospective home buyers’ perceptions about the affordability and availability of homes for sale in their market. The Housing Trends Report runs every quarter to track changes in buyer’s perceptions over time.

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Reasons For The Continuing Price Appreciation

 The current shift in the market will cause a slow down in price growth but professionals in the industry report that price appreciation will keep going. Good news for sellers as the home prices will not drop.  There are two reasons why this is the case: supply and demand. 

Housing inventory is increasing in 2022 but it is a slow increase and housing demand is still low.  The reason we do not have enough homes on the market today stems from the 2008 crash.  After the crash, many builders and businesses in the industry closed shop.  Now that the housing market is hot with buyer’s demand, there are not enough houses being built.  After the crash in the housing market there has been a long period of underbuilding.   Since this has been going on for fourteen years, it will take awhile to build back from the underbuilding of new homes.

Even though we are seeing higher home prices and an increase in mortgage rates, this does not mean that buyer demand is cooling off.  In fact experts predict that Millennials will keep the buying momentum going.  The reason we are seeing the Millennials flooding the market is due to their agining into their peak homebuying years.  The Millennial demand coupled with low housing supply is causing the pressure to rise on home prices.

” Millennials continue to transition to their prime home-buying age and will remain the driving force in potential homeownership demand in the years ahead”, says Odeta Kushi, Deputy Chief Economist at First American.

” After all, supplies of homes for sale remain near record lows. And while a jump in mortgage rates has dampened demand somewhat, demand still outpaces supply, thanks to a combination of little new construction and strong household formation by large numbers of millennials “, says Bankrate.

Home prices are not going to fall due to these changes. Since there is still an unbalance between demand and supply.  Like with all products in any market, supply and demand  will predict the market.  A local sales agent can help you navigate the home buying process even when the market is shifting.

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