Home Shoppers, Start Your Engines – It Could Take a While

Filed in Economics by on February 15, 2018 1 Comment

President’s Day weekend is like the “Black Friday” of housing. While spring is traditionally the busiest season for home buying, many of those who are looking to get a head start on the competition are likely to start their search this weekend.

That is, if they haven’t already started shopping. A good portion of prospective buyers haven’t stopped since last year’s home buying season.

In fact, according to a national poll conducted by NAHB, 61% of prospective home buyers have been trying to find a home to buy for at least three months. Those who were polled cited several reasons for their extended search — including struggling to find a home with their desired features or in their preferred neighborhoods — but mostly it comes down to price.

“High home prices are really prolonging the search for thousands of potential home buyers and preventing them from pulling the trigger,” said Rose Quint, assistant vice president for survey research. “The low levels of inventory are driving up prices and compounding the issue of affordability.”

Interest rates are also expected to go up in the months ahead, making some home shoppers feel a little extra pressure to scoop up a home before the next increase. Wages are on the rise, too, though not nearly as fast as home prices. But experts note that over time, rising interest rates and wages can offset each other.

“Rising rates increase the cost of buying a home with a mortgage. However, higher incomes are particularly helpful for home buyers saving for a downpayment and help counter the negative effect of higher mortgage rates on housing affordability,” said NAHB Chief Economist Robert Dietz in a recent issue of Eye on the Economy. “This environment can yield overall positive outcomes for housing.”

For more analysis, go to Eye On Housing.

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  1. There’s little doubt that the process of finding a desirable, affordable home is a challenge today, especially for first-time buyers. Limited available stock from which to choose and high prices present headwinds to finding and securing a decent place to live. The current market climate often can require a greater degree of flexibility (i.e. ability to bid up a desired property as needed) and ability to compromise (willingness to accept certain less-desirable aspects of a property, such as longer commute or as-is condition) on the part of buyers. This can improve the success ratio and shorten the selection period, but of course, a bit of rebalance from a market that highly favors sellers to one that favors buyers just a bit more would certainly help, too.

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