Lack of Affordable Homes Keeps Prospective Buyers Sidelined
Lack of Affordable Homes Keeps Prospective Buyers Sidelined. Prices Remain at All-Time Highs, Keeping Many Buyers from Making a Purchase.
Looking for a new home? Good luck. Skyrocketing prices, limited inventory, cash offers, no contingencies, and bidding wars keep many buyers on the sidelines. Many buyers have put their house hunt on hold. The lack of affordable homes has locked many buyers out of the market.
“The inability to find an affordably priced home is the primary reason active buyers have not pulled the trigger, with 39% citing high prices as their biggest obstacle in the second quarter of 2021,” according to the latest Housing Trends report produced by the NAHB Economics team (NAHB). In all, 56.6 percent of new and existing homes sold between the beginning of April and the end of June were affordable to families earning the U.S. median income of $79,900, the lowest affordability level since the beginning of the first quarter of 2012 (Hoi).
“Two-thirds of buyers who were actively engaged in the process of finding a home in the second quarter have spent upwards of three months searching for a home without success.” (NAHB)
Fatigued and frustrated, buyers are burned out as prices continue by as much as 25% vs. 2020 prices in many markets competition remains fierce.
“Imagine that you’re a low- or moderate-income person, a single mom, a working-class person of color,” says Ed Gorman, Managing Director, NCRC Housing Rehab Fund. “There is a real sense of hopelessness. Some folks don’t even have a shot at owning a home in the foreseeable future in this market.” And that means that the racial wealth remains near lows not seen since the passage of Civil Rights legislation in the 1960s. While the market is booming for many sellers, too many Americans are left behind when it comes to homeownership and the ability to build generational wealth.
As of 2020, the gap between Black and White homeownership rates is a staggering 31 percent, the largest it has been in decades. And although the gap has narrowed, Latino homeownership rates are still roughly 27 percent behind that of White households as of 2020.
Yet, U.S. household formation is being driven by communities of color, particularly Latinos. According to 2020 U.S. Census Data, the Hispanic population accounts for almost half of the overall U.S. population growth. (Schneider)
While the current boom is not a “bubble” akin to the frenzy of the rise and crash in the market a decade ago, it has further exacerbated the affordable housing crisis in our country. Broad swaths of the population, especially BIPOC communities and Millennials, are locked out of the market, leaving millions of Americans in a less secure financial position and widening the racial wealth gap.
“Creating opportunities to own an affordable home is a significant step in redressing our nation’s exclusionary policies and will help millions bridge the racial wealth gap,” says Gorman. “But today, the dream of homeownership is out of reach for so many working people. And many, especially people of color, may never be able to afford a home. This simply can’t continue. We need a Moonshot commitment to building affordable homeownership, with at least 2 million homes/year built for the next decade. That is roughly a 66% increase over current homebuilding rates.”
Homeownership remains the primary way Americans build wealth. But today there are just not enough homes to meet the demand. Some analysts expect home prices to continue to rise as interest rates and supply remain low and demand hovers at record highs. For the foreseeable future, millions of Americans remain priced out of homeownership.
“Housing Opportunity Index (Hoi).” NAHB, NAHB/Wells Fargo, 2021, www.nahb.org/news-and-economics/housing-economics/indices/housing-opportunity-index?_ga=2.91804893.677455196.1628776430-403372675.1628776430.
NAHB. “High Prices Most Common Reason Why Active Buyers Remain Sidelined: Nahb Now: The News Blog of the National Association of Home Builders.” NAHB Now | The News Blog of the National Association of Home Builders | NAHB Now | The News Blog of the National Association of Home Builders, National Association of Homebuilders, 11 Aug. 2021, 2:52, nahbnow.com/2021/08/high-prices-most-common-reason-why-active-buyers-remain-sidelined/.
Schneider, Mike. “Census Data: US Is DIVERSIFYING, White Population Shrinking.” AP NEWS, Associated Press, 13 Aug. 2021, 3:03 pm, apnews.com/article/race-and-ethnicity-census-2020-7264a653037e38df7ba67d3a324fc90d.