Reports: Elevated home prices and mortgage rates, limited inventory are homebuying barriers

WASHINGTON — The current real estate market’s high home prices and mortgage rates, as well as limited inventory, are the top reasons Realtors and prospective homebuyers across races and ethnicities cited as barriers to purchasing a home, according to two new reports from the National Association of Realtors.

In partnership with Morning Consult, NAR’s 2023 Experiences & Barriers of Prospective homebuyers Across Races/Ethnicities report surveyed white, Hispanic/Latino, Black and Asian prospective homebuyers about their experiences. NAR’s 2023 Experiences & Barriers of Prospective homebuyers: Member Study surveyed Realtors who focus on residential real estate regarding the latest buyer with whom they worked who has not yet purchased a home and compares findings with the consumer study.

“Homebuyers face the most difficult affordability conditions in nearly 40 years, due to limited inventory and rising mortgage interest rates,” said Jessica Lautz, NAR’s deputy chief economist and vice president of research. “The impact is exacerbated among first-time buyers, who are more likely to be from underrepresented segments of the population.”

Among prospective homebuyers, Asian (27 percent), Hispanic (24 percent), Black (20 percent) and white (15 percent) respondents said the main reason they have not yet bought a home is because they are waiting for prices to drop. White respondents (15 percent) were just as likely to say it is because they are waiting for mortgage rates to drop. Additional market-related reasons that prospective homebuyers cited as barriers include waiting for mortgage rates to decline (18-25 percent of all four groups) and not enough available homes within their budget (19-24 percent of all four groups).

The top three reasons Realtors said buyers have not yet purchased homes are the same as reported by consumers: not enough homes available for purchase in buyers’ budgets (34 percent), buyers are waiting for mortgage rates to drop as higher prices affect affordability (18 percent), and buyers are waiting for prices to drop (9 percent). These three factors greatly impact affordability because limited inventory drives up home prices, and higher rates increase monthly mortgage payments.

Saving for a competitive home down payment is also a primary obstacle for prospective homebuyers (6-9 percent of all four groups). In terms of what holds them back from saving for a sufficient down payment, prospective homebuyers across races and ethnicities cited as barriers current rent/mortgage payments (43-56 percent of all four groups) and credit-card payments (38-57 percent of all four groups). Despite this, awareness about existing down-payment-assistance programs is low among prospective buyers who are saving for down payments. Only 8-15 percent of all four groups applied for these programs, 20-33 percent considered but did not apply to these programs, 21-32 percent did not consider these programs, and one-third (30-33 percent of all four groups) said they were not aware of these assistance programs. For prospective homebuyers who are aware of down-payment-assistance programs, the primary reason they did not apply for them is because they did not know enough about the programs (44-58 percent of all four groups).

Likewise, more than half of Realtors (53 percent) said at least one issue is holding their latest buyer back from saving a competitive down payment: most likely current rent or mortgage payments (23 percent) or credit-card balances or payments (17 percent). Further, only 23 percent of Realtors said their buyers experiencing these challenges have applied for down-payment-assistance programs. This is most likely because their income is too high (30 percent), they did not know enough about the programs (19 percent), or they are worried about the competitiveness of their offers in multiple-bid situations (17 percent).

“Down-payment-assistance programs often fly under the radar for potential homebuyers. Using programs — such as Federal Housing Administration, U.S. Department of Veterans Affairs or U.S. Department of Agriculture loans — can make homeownership more attainable. Experts, such as agents who are Realtors, can educate potential buyers about these programs. Doing so will bring in more first-time buyers and narrow the racial homeownership gap,” Lautz said.

Discrimination also plays a role in the homebuying process. About one in six (13-16 percent of all four groups) prospective homebuyers across races and ethnicities reported facing discrimination. More than half of Black (63 percent), Asian (60 percent) and Hispanic (52 percent) prospective homebuyers who reported this said it was a result of their race or ethnicity. Of these, the largest proportions of every group are most likely to report that this discrimination manifests in steering toward or away from specific neighborhoods (36-51 percent of all four groups) and more strict requirements (32-48 percent of all four groups). Despite all of this, most discrimination during the homebuying process goes unreported: 47-81 percent who described such discrimination did not report it to a government agency or legal-aid organization.

Interestingly, only 1 percent of Realtors who took the survey reported that their buyers experienced discrimination during the homebuying process, while 13 percent were not sure. Those reporting discrimination are most likely to say this is based on race or ethnicity and lay this at the feet of lenders, saying buyers experienced this in the type of loan product offered (43 percent) or that buyers did not receive a call back from lenders (29 percent). Of those who reported discrimination, 57 percent reported it based on race, 29 percent reported it based on age, and 21 percent reported it based on familial status (including marriage or parental status). Just 7 percent said the buyer reported the discrimination, which was on the basis of either race or religion or both, to a government agency or legal-aid organization.

To help address discriminatory practices in real estate, NAR offers several resources to its members, including Fairhaven, an interactive training simulation based on real fair-housing cases; Bias Override, an implicit bias training course with practical tips to override bias; At Home With Diversity, a certification course aimed at serving diverse consumers; and a confidential voluntary self-testing program for brokerages to assess agents’ compliance with fair-housing laws. In Washington, NAR advocates for strong fair-housing and fair-lending enforcement and for policies aimed at closing homeownership gaps among demographic groups.”