According to NerdWallet, 8 out 10 Americans (83%) said that buying a house is their top priority for the fifth consecutive year. This is despite a pandemic, turbulent economic times, and a housing market that has generally been a benefit to sellers.


Consistent: The optimistically high percentage of people who plan to buy such a product in the next year.


According to the Harris Poll survey of 2,051 adults in the United States, 28 million Americans (or 11%) plan to purchase a home within the next 12 months. Since we started asking in 2019, the rate has been steady and ranges from 9-11%. As in years past, these numbers show an unrealistic optimism. About 6 million homes were sold in 2021, a time when the market was on fire.


Holden Lewis, Nerdwallet Home and Mortgages expert, says that home buyers have not been able to catch a break since the outbreak of the pandemic. “The competition among buyers was intense in 2020 and 2021, then mortgage rates shot up in 2022. In 2023, the housing market might finally be more friendly to buyers. There are some areas where home prices could decline and mortgage rates may fall.


Key Findings

Many potential buyers might have unrealistic expectations about the price of a home. One in nine (11%) Americans intends to buy a home within the next 12 months. On average, these prospective buyers expect to spend $269,000. According to the National Association of Realtors, this is significantly less than the average home price of $379,100 as of October 2022.

Americans often blame the economy and rising mortgage rates for their worsening homebuying prospects in 2023. This is regardless of whether they are planning to buy a home. This is an increase of 25% from last year’s survey. A worsening economy (58%), and higher mortgage rates (57 %). are the top reasons why you feel worse.

Many expect a crash in the housing market. A majority of Americans (67%) believe that a housing market crash will occur within the next three year.

Buyers found it difficult to find a home in 2022. 70% of Americans had plans to buy a house in 2022, as of January 1, 2022. However, they were not successful. Only 4% of those who failed to fulfill their plans said they had to cancel them due to changes in their minds about buying a home.


Budgets for homebuying may require a reality check


According to the survey, 11% of Americans who plan to buy a home within the next 12 month hope to spend $269,000. This group expects to spend $200,000. This is a significant difference to the median home price in the country, which was $379,100 as of October 20,22 according to the National Association of Realtors. It suggests that some potential buyers might be disappointed when they start shopping.


The survey also found that 86% of Americans believe homes in the U.S. are too expensive.

Tip for home buyers: Setting a realistic budget to buy a home is not only a way to ensure that you have a manageable monthly mortgage payment, but it also simplifies the buying process. You can limit your search by drawing a line in sand before you start. This will allow you to have a precise point at which negotiations can be stopped. Overextension can lead to buyer’s remorse and overextension. To ensure that your upper limit is reasonable, talk to a local agent about what the average home price is in the area you are interested in.


Economic outlooks negatively impacted


According to the survey, 32% of Americans feel less confident about their ability in 2023 than 2022. This is regardless of whether or not they intend to buy a home. This is an increase from the 25% who felt similar last year. This is the first time that in three years of annual surveys, more Americans felt worse about buying in the New Year than they did last year.


Many people blame economic factors for their pessimism. The following are the top five people who feel less confident about their ability to buy a house in 2023 than they do in 2022.


  • 58% are feeling worse as they believe the economy will get worse by 2023.


  • 57% are more worried about rising mortgage rates.


  • 57% are worried about rising home prices.


Far fewer people cite financial reasons as the reason for their despair. 24% feel worse because of a decrease in savings, 22% because of a lower income, and 20% because they have more debt.


The economic impact on those who don’t own homes is severe. 28% of respondents to the survey said the current economic climate is stopping them from becoming homeowners. This is up from 20% in the previous two years.


However, economic prospects could be worse than expected


According to the survey, 67 percent of Americans believe that a crash in the housing market is likely within the next three year. Although it may seem unlikely, fear of a crash is understandable given the rapid rise in prices over the last few years.


Lewis states that “home prices have already been falling, particularly on the west coast” and that prices will drop in certain cities by 2023. A drop in home prices doesn’t necessarily mean a crash. The median home value increased by 40% between 2020 and 2022. This means that most homeowners will still have equity, even if the prices drop 10% or 20%. Although a price drop of this magnitude would be difficult for homeowners, it would attract buyers.


High mortgage rates are another potential source of confusion. According to the survey, 3 out 5 Americans (61%) believe that current mortgage rates have never been this low. The very low rates for 2020 and 2021 are far less common than the 6% currently being offered on 30-year mortgages. According to data from Freddie Mac, the average rate on 30-year mortgages has been 7.75% for 50 years.

Tip for home buyers: Rates are now higher than they were in the past few years. The increased cost of interest should be considered when you are considering homebuying. It’s not a reason to put off buying a home unless you are comfortable waiting a while. The low, low rates for 2021 are an anomaly. You should consider these higher financing costs as if it’s a fact of life. If rates drop, you’ll be in a better position to purchase.


The majority of 2022 buyers were short


Three out of 10 (30%) Americans had plans to buy a house in 2022 (as at January 1, 2022). They either bought or were in the process. 70% of those who weren’t successful were left out. For some time it has been a strong selling market. In most areas, the odds of buyers buying in 2022 were not in their favor. It was not unusual to see competing offers for low-priced homes.


The most common reason prospective buyers failed to purchase in 2022 – 70% of them were planning to.


  • 26% of respondents say they have made at least one offer for a home, but that it did not go under contract.


  • 26% of those in that group postponed, or cancelled, their plans because they couldn’t afford to buy the homes.


  • 25% put off or cancelled those plans when they couldn’t find a home that would meet their needs.


Some buyers may have had 2022 experiences that influenced their desire to purchase a home. In fact, 4% of those who tried to buy a house in 2022 said they abandoned their plans after changing their minds about buying a home.


Homebuyers who are discouraged by the prospect of buying a home don’t have to be discouraged. 60% of Americans believe that homebuying isn’t as important as it used to be (i.e. the American Dream).

Tip for home buyers: Although housing prices have stabilized and there are more homes available, that does not mean it will be easy to buy in 2023. Prospective buyers need to be open to compromise. Buyers will need to compromise on certain items and the price of their home because there is still a shortage.


Current barriers to homebuying


Although the current economic situation is important for many buyers, there are still some things that can prevent them from buying a home. According to previous surveys, the biggest obstacles to homebuying have been having too little money saved and a low credit score.


These are the three main obstacles to homeownership that people who don’t own a home face. However, there are steps potential buyers can take to overcome them.

Tip for home buyers: No matter if you buy in 2023 or later, your down payment will increase, your credit score will improve, and your income will be higher. A larger down payment will result in a lower loan amount and less interest over the term of your mortgage. Higher income and better credit will help you secure the best mortgage rate. These things can be done sooner than you think.


Long-term goal for home buyers: To save money


Buyers who have a longer timeline — those who plan to buy a home in the next five-years — are already looking at ways to save money. 41% of Americans plan to buy a house in the next five-years. 93% of these buyers say they are already planning or using strategies to make it more affordable.


When rates are high, adjustable-rate mortgages can be attractive. 14% of people who plan to purchase in the next five year say they will get one to help make homebuying affordable. Fixed-rate mortgages have a fixed interest rate that can last for several years. However, the fixed introductory rate may be lower than traditional fixed-rate mortgages. The market will determine if the interest rate changes or increases after that time. The survey found that 81% of Americans consider ARMs “risky” even though they are more well-regulated and transparent than before 2000’s housing market crash.


The younger generations that plan to purchase a home in the next five-years are more likely to do so than their elder counterparts. This is compared to 17% of Generation Xers (43-58) and 14% for baby boomers (59-77).

Tip for first-time home buyers: Lewis suggests that first-time buyers be open to all opportunities, even as they work towards down payments. It’s important to set a goal for savings, but also be open to grabbing an opportunity if it presents itself sooner than you expected. You could miss out on the best opportunities in your area and the perfect home if you wait to make your final deposit into your downpayment fund.


METHODOLOGY

The Harris Poll conducted this survey online in the United States for NerdWallet between Dec. 1-5th, 2022 among 2,051 U.S. adult ages 18-plus. A Bayesian credible interval is used to measure the sampling precision of Harris online surveys. The sample data for this study is within +/-2.8 percentage points using a 95% confidence limit. Alikay Wood, [email protected] can provide more information about the survey methodology including weighting variables, subgroup sample sizes and other details.


NerdWallet refers to generations as Generation Zers (ages 18-26), millennials (ages 27-42), Generation Xers (ages 43-58), and baby boomers (ages 59-77).


The U.S. Census Bureau’s July 1, 2021 estimate of the adult population was used to calculate the number of Americans who plan on buying a house in the next 12 month.



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