Home prices have skyrocketed by nearly 20% over the last year and mortgage rates have risen faster over the past three months than they have in decades. But the high cost to buy a home is not the only obstacle prospective buyers are facing.
Other hurdles include a lack of available homes for sale that fit the buyer's criteria, bidding wars, and failing to have enough money for a down payment, according to a new study from the National Association of Realtors and Morning Consult.
"Record-high home prices and record-low inventory have made the home buying process exceedingly difficult," said Jessica Lautz, NAR's vice president of demographics and behavioral insights. "Our study shows that while the inventory crisis is affecting potential buyers of every race, nearly all home buyers agree that home ownership is still an important part of the American Dream."
Not enough homes to buy
For a growing number of people, however, the dream of homeownership remains far out of reach.
Inventory is near record lows and the number of sales at the more affordable end of the market is lower than last year because demand is totally outstripping supply.
There were only 870,000 homes for sale at the end of February, according to NAR. And the number of homes purchased that were priced at the sweet spot for first-time buyers -- between $100,000 and $250,000 -- dropped by 26% from last year. At a higher price range -- $500,000 to $750,000 -- the number of homes increased by 24% in February from the year before.
Economists point out that more than a decade of underbuilding has resulted in low housing supply and the shortage is even worse at the more affordable end of the market.
"In the current hot market, people who have traditionally enjoyed homeownership can capitalize on those gains to realize new opportunities," said Bryan Greene, NAR vice president of policy advocacy. "Meanwhile, the market becomes increasingly unaffordable, and the obstacles greater, for those trying to enter the market."
Competition remains fierce
Among the top obstacles, according to NAR, is finding a home that meets the buyers' expectations and fierce competition with other buyers.
Jennifer and Thomas Karnes were up against both challenges in their search for a four-bedroom, two-bath home in the Hampton Roads area of southeastern Virginia. The couple wanted to spend less than $500,000, but eventually had to increase their budget.
"We told ourselves we weren't going to settle from the very beginning," Thomas told Sara Sidner in an interview for CNN+'s "The Big Picture." "Literally within hours, something's gone, scooped up and it is off the market."
They expanded their search to find more houses in their price range and eventually saw 35 homes. Each visit brought urgent pressure.
"It's hard when you walk into a home, sometimes we'd only have less than 15 minutes to look because there would be a line," said Jennifer.
They made five competitive offers, including full price offers with deal sweeteners like waiving home inspections. They even offered one seller Bitcoin. All of them were rejected.
"It was just this roller coaster of 'What can we do?' 'What can we give them?' and the emotional toll of continuing to look and continuing to get rejected is so tough," said Jennifer.
Ultimately, the couple were unable to find a home that met their needs in their price range. So they increased their budget, offering $50,000 over asking price on a fixer-upper home that was in need of a new roof and windows. That offer -- of $750,000 -- was accepted.
Saving for a down payment
Having enough money saved for a down payment remains one of the biggest nuts to crack for buyers.
About three-quarters of potential homebuyers are currently planning to save for a down payment, according to the report, which most expected to take between six months and three years.
The median price of a single family home in February was $363,800, which is up about 32% from 2019, before low interest rates super-charged the housing market, according to NAR. Meanwhile, the median household income in the US is about $67,000.
A buyer looking to purchase a median priced home in February, when mortgage rates were lower than they are now, needed a median family income of $88,424 to purchase that house and income of $65,328 to even qualify, according to NAR.
That prices a lot of buyers out of the market. In addition, even well-qualified buyers are outbid by individuals and investors who are snapping up homes in all-cash deals.
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Why it's so hard to buy a home right now - CNN
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