How housing affordability challenges are hampering home buying

Housing affordability has continued to be a challenge for the housing market as it grapples with a lack of inventory, due in large part to five key factors: labor, land or lots, lending, lumber and other material costs, and laws and regulatory burdens. COVID19 has exacerbated a number of these factors — notably material costs and labor shortages — and kept inventory low, which have caused housing prices to soar and priced numerous Americans out of purchasing a home.

According to recent research from the National Association of Home Builders (NAHB), higher mortgage rates and double-digit growth in home prices are discouraging a growing share of buyers from engaging in the purchase process. At its peak in mid-2021, 61% of perspective buyers were actively trying to find a home to buy; that share has dropped back to pre-pandemic levels at 46%.

Of the buyers who were actively engaged in the process of finding a home in the first quarter of 2022, 67% of have spent 3-plus months searching for a home without success. Although the majority will continue to search for a new home, a growing segment of prospective home buyers are choosing to wait. According to NAHB’s latest Home Trends Report, the share of prospective buyers postponing their home search until next year or has risen steadily from 20% in the second quarter of 2021 to 25% in the first quarter of 2022.

Chief among this segment are first-time home buyers. Their share of prospective buyers has fallen from 65% in the third quarter of 2021 to 60% in the first quarter of 2022 — or roughly the same level as prior to the pandemic. This of particular concern, as home buying can be a key factor in building wealth.

Although some buyers may be willing to pay more for a new house, the share of buyers who can afford half or more of the homes on the market is down to 19%, after peaking in the fourth quarter of 2020 at 37%. Affordability concerns have risen in every region of the country, with the largest jump occurring in the Northeast but we are feeling it in the Southwest too.

Most people are not aware that a significant part of the price of a new home is in regulation costs and fees. Recent reports show that 25% of the cost of your new home go toward federal regulations and fees imposed by municipalities because you pay sewer, water, roadway, and park impact fees. A recent study performed by the Research Center at A & M showed that for every $1,000 increase in the price of a new home it knocks 22,000+ buyers out of the market.

We are all concerned about housing affordability. Every family or individual should be able to own a home if that is their dream or goal. We will continue to fight to remove barriers to affordable housing. For more information on our efforts, please visit the Greater San Antonio Builders Association’s website at www.sabuilders.com or visit NAHB at nahb.org.

In closing, my wife Molly and I would like to wish all the Father’s a very Happy Father’s Day. Have a great Sunday!

Sincerely, Mike Sowry, President

By Mike Sowry 2022 President, GSABA