There’s no market without buyers, but that doesn’t mean that buying a home is easy for them.
Two new surveys from the National Association of REALTORS® (NAR) aim to identify the main barriers homebuyers face in becoming homeowners:
2023 Experiences & Barriers of Prospective Home Buyers Across Races/Ethnicities (conducted online via Morning Consult) surveyed White, Black, Asian and Latino(a) homebuyers in order to break down differences in homebuying outlook and experience across racial lines.
NAR’s 2023 Experiences & Barriers of Prospective Home Buyers: Member Study surveyed REALTORS® themselves about their latest experience with a buyer who hadn’t yet bought a home.
The big takeaway: There are tremendous racial divides when it comes to what prevents people from buying a home. However, inventory and affordability represent the biggest structural roadblocks to prospective buyers across all demographics.
The most commonly cited reason among prospective buyers for why they haven’t bought a home yet is that they were waiting for prices to drop. Of respondents who said this:
- 27% were Asian
- 24% were Latino(a)
- 20% were Black
- 15% were White
The next two most commonly cited reasons include prospective buyers waiting for mortgage rates to drop and a lack of available/affordable homes.
Findings from the member study that surveyed REALTORS® align with the homebuyer survey, pointing to the following as the top three reasons why buyers haven’t purchased yet: insufficient supply (34%), waiting for mortgage rates to drop (18%) and waiting for prices to drop (9%).
Surveyed buyers indicated that inability to save for a down payment is an impediment, with the most cited reasons being their current mortgage payments/rent or outstanding credit card payments.
- 9% of Black
- 8% of Latino(a) respondents said so
- 7% of White respondents said so
- 6% of Asian respondents said so
Fifty-three percent of surveyed REALTORS® also indicated that down payments are a barrier to buyers they know; 23% cited the current rent/mortgage explanation, while 17% said credit card payments were the reason.
Compounding the problem of down payments is that, overall, knowledge of and interest in financial assistance programs is low. Surveyed buyers, across all four groups, said:
- 8% – 15% (across the four groups) applied for down payment assistance
- 20% – 33% considered but decided against applying
- 21% – 32% did not consider applying
- 30% – 33% said they were unaware of assistance programs
Twenty-three percent of REALTORS® said their clients applied for down payment assistance. Asked why their clients did not consider this option:
- 30% said buyers’ income is too high
- 19% said buyers do not know enough about these programs
- 17% said buyers are worried about competition in multi-bid offers
“Down payment assistance programs often fly under the radar for potential home buyers. Using programs—like FHA, VA or USDA loans—can make homeownership more attainable,” said Jessica Lautz, NAR’s deputy chief economist and vice president of research. “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.”
That brings us to the elephant in the room: discrimination. While 13% – 16% of prospective homebuyers, across all groups, report facing discrimination, 63% of Black homebuyers say this was due to their race. Sixty percent of Asians and 52% of Latino(a)s say the same.
Discrimination in home buying manifests in steering away/toward neighborhoods and stricter requirements for the buyer; Black homebuyers report facing this discrimination the most at 51% compared to Latino(a)s (43%), Asians (41%) and Whites (36%).
Black homebuyers (and homeowners) in particular have been disfavored by the market, even as the low rates and federal stimulus of 2020 – 21 helped increase homeownership broadly across the country. White families, who are much more likely to be approved for loans and tap into generation wealth, have an undue advantage.
Conversely, while most surveyed respondents indicated that they did not report the discrimination they faced, Whites were the most likely to do so (53%) compared to Blacks (40%), Latino(a)s (30%) and Asians (19%).
Surveyed REALTORS® indicated that the majority of their buyers are White (58%), while 11% are Latino(a), 10% are Black and 3% are Asian. Only 1% of surveyed REALTORS® said their buyers experienced discrimination; a staggering 86% said their buyer had not. Most of the former say the discrimination came from lenders, with buyers being offered either a disadvantageous product or not receiving a callback at all.
Fifty-seven percent said their buyers were discriminated against based on race, but 29% suggested that age was the defining factor, while 21% said familial status. Research has shown that married couples have an edge in the housing market. Sixty-four percent said that their buyer did not report the discrimination.
Based on these responses from NAR members, the median prospective homebuyer is a White, millennial first-time homebuyer. Just remember that not all homebuyers have the same problems or experiences as the market median.
“Homebuyers face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates,” concluded Lautz. “The impact is exacerbated among first-time buyers who are more likely to be from underrepresented segments of the population.”
Read the full reports here and here.
Devin Meenan is an assistant editor with RISMedia.
