Prospective Home Buyers: A Study into Their Experiences and Obstacles
Barriers to Homeownership: Insight from Recent Surveys In recent comprehensive surveys carried out in partnership with Morning Consult for NAR, REALTORS®, and consumers have shed light on the significant barriers that prospective home buyers are currently grappling with. The findings, which encompass the results of the 2023 REALTORS® Experiences and Barriers of Prospective Homebuyers Across Races/Ethnicities study, unravel the intertwined elements that are shaping the home buying landscape.
Real Estate Market Dynamics
A considerable portion of REALTORS®, about 34%, highlight that the primary reason the latest buyer they worked with has not secured a home is the scarcity of affordable options in the current market. The prohibitive costs are steering 18% to hold off, with hopes of a dip in mortgage rates, while 9% are biding time for a general price reduction.
Meanwhile, consumers echo these concerns but in a different order of priority, setting their sights on a price drop as the top reason for delaying their purchase. These discernments underline complex market dynamics where insufficient inventory escalates prices, and high mortgage rates limit affordability options.
Financing: The State of Loans and Approvals
Delving into the financing landscape, a notable majority of prospective buyers have embarked on the loan application process, with 77% of REALTORS® affirming that their clients have secured approvals. Despite this encouraging statistic, a lower but still significant count faces loan rejections, primarily driven by low credit scores and inadequate down payments.
In the choice of loans, conventional loans are the front-runners, with 68% of REALTORS® reporting that their clients have explored this route. In a deeper cut into demographics, it emerges that African-American/Black and Hispanic/Latino(a) buyers show a pronounced interest in FHA loans compared to their White and AAPI counterparts. A section delving into VA loans presents a varied picture with a minor segment considering this option due to eligibility issues.
Down Payment Conundrum
REALTORS® bring to the fore that over half of their clients face hurdles in accruing a substantial down payment, a picture mirrored in the consumer study. The down payment pathway is strewn with challenges including current rent or mortgage obligations and spiraling credit card debts, casting a shadow on their home-ownership dreams.
Surprisingly, a substantial number of potential buyers remain in the dark about existing down payment assistance programs. Here, REALTORS® can play a pivotal role in shedding light on these aids, helping clients to navigate them more effectively and potentially unlocking doors to homeownership for many.
Property Preferences: Location and Type
The job location prominently influences the choice of home location, with a significant emphasis on minimizing the daily commute. A juxtaposition of the REALTOR® and consumer studies divulges a consensus on a 30-minute or less drive as a desirable attribute.
As for property types, the scales tip slightly in favor of pre-owned homes, albeit with a considerable number harboring no distinct preference. New constructions hold allure for a smaller group, outlining a potential area for growth and exploration in the real estate landscape.
The Underbelly of Discrimination
Discrimination lurks in the home-buying journey, a fact substantiated by both the REALTOR® and consumer studies. While REALTORS® reports a relatively low incidence, consumers narrate a higher encounter rate, pinpointing race and ethnicity as the principal discriminating factors.
In this context, the NAR stands tall, offering resources like the Fair Haven: A Virtual Simulation, and DEI and Fair Housing Self-Study Modules, equipping REALTORS® to champion diversity and foster a culture of inclusivity in the home buying journey. It’s a step toward mitigating discriminatory practices and steering potential buyers towards a fair and just buying process, thereby ushering in an era of informed and conscious home buying in the American real estate landscape.