Realtor.com research finds half of shoppers looking for a home this spring are constrained by budget; many expect it will take a year or more to find and close on a home.
This spring’s home shoppers expect less competition overall as more inventory continues to hit the market nationwide, but will struggle with affordability as home prices continue to rise, according to new survey data released today by realtor.com®, the Home of Home Search℠.
The survey also found, nearly half of shoppers this spring are looking for homes at or under $200,000, which despite less competition will prove difficult to find, as this one segment of housing has actually experienced the largest inventory decline year-over-year.
Realtor.com® conducted the online survey earlier this month, consisting of 1,015 respondents planning to purchase a home in the next 12 months in conjunction with Toluna Research.
“The 2019 spring home buying season will be characterized by rising home prices, a moderate pace of home sales, and an influx of inventory,” said Danielle Hale, realtor.com®'s chief economist. “More homes on the market and lower mortgage rates will help offset some difficulties associated with price gains, but affordability will remain the primary challenge for shoppers, particularly in lower price segments.”
When survey respondents were asked whether falling mortgage rates or higher home prices had the greater impact on their search, 38 percent of respondents indicated the rising home prices, 26 percent said falling interest rates, and 35 percent said neither.
The largest segment of shoppers heading into this spring have been searching for a home for seven months or more - this is nearly identical to last year. Slightly more than a quarter - 26 percent - have been in the market four to six months, and 34 percent have just entered the market in the last three months. This has flipped from last year when 34 percent had been searching for four to six months, and 26 percent had been searching three months or less. This could be an indication that fewer shoppers started looking in late 2018 due to the mortgage rate spike.
But with more overall inventory available to buyers this year, competition is expected to be less intense. When asked how much competition shoppers expect to face this year, just over 60 percent indicated at least some competition, as compared to 70 percent last year.
Only 17 percent of this year’s shoppers plan to offer more than asking price this year to secure their purchase, down from 26 percent last year. Similarly, 33 percent of shoppers this year expected to put down more than 20 percent, which is significantly less than last year’s 40 percent. Only 38 percent plan to check listings websites everyday, compared to 42 percent last year.
“The spring homebuying season is an improvement over last year from an inventory perspective nationwide, but would-be buyers still face challenges. This year, shoppers are going to be grappling with their budgets, rather than competition from a horde of other buyers. Instead of worrying about which tactics will help them get ahead, potential buyers will have to decide what they are willing to give up in order to stick to their budget,” Hale added.
The shift in higher-end buyer mentality is likely attributed to the recent growth in inventory, which has increased six percent year-over-year, according to Hale, and will give buyers more options to choose from this spring. For example, the number of homes priced at or above $750,000 rose by 11 percent in February. However, the number of homes priced at $200,000 or below dropped by seven percent year-over-year during the same time.
The drop in homes under $200,000 is likely to create a difficult environment for entry level home buyers as nearly half of home shoppers this spring are looking for a home at or under $200,000. Alternatively, only 6 percent of spring shoppers are looking for a home at or above $750,000 -- the price range that saw the largest increase since last year.