Impatient homebuyers are gradually accepting the reality of the housing market: BofA

Prospective homebuyers are slowly growing less sensitive to home prices and high-interest rates, and fewer of them are willing to wait for a better market to buy a home. 

According to Bank of America’s 2023 Homebuyer Insights report, only 62% of prospective homebuyers are willing to wait for home prices and/or rates to fall, down from 85% in June 2023. Purchase activity picked up in September, as sales of new single-family homes increased to a seasonally adjusted level of 719,000, up from 680,000 sales in April 2023. 

“When it comes down to it, if buying a home is your goal and within your budget, the best time to buy is when you’re ready financially and you can find a home that fits your needs,” Matt Vernon, head of consumer lending at Bank of America, said in the report. “Even in the current interest rate environment, there are clear benefits to purchasing a home and beginning to build equity.”

As of July 2023, about 80% of outstanding U.S. mortgages had an interest rate below 5%, according to Zillow. Meanwhile, the average 30-year fixed mortgage rate topped 8% in October. As a result, many homeowners stayed put and kept their mortgages and postponed listing their homes. It deepened an already existing inventory shortage and worsened affordability woes. First-time homebuyers were particularly harmed by this trend. 

However, homebuyers are resourceful and show signs of adaptation to the current market

BofA researchers found that homebuyers were willing to sacrifice several features to find their home quicker. Almost a third of people surveyed reported being ready to give up on having a brand new home, living close to their family, having access to public transportation, or living in a neighborhood with historical charm. There were also some generational disparities in what would-be buyers were willing to sacrifice. Gen Zers, individuals born between 1997 and 2012, cared more about space but were willing to compromise on location, whereas boomers, who were born between 1946 and 1964, were the opposite. 

Meanwhile, 50% of current homeowners would be willing to exit their mortgage to buy their dream home 

According to the survey, 50% of homeowners would be prompted to sell their homes if their dream home became available, and 54% would move if they found a more affordable area, regardless of the current mortgage rates.

Homeowners listed other reasons that could prompt them to sell:

• 40% of respondents said they would move for a job opportunity or a nicer neighborhood
• Between 30-to-40% said they would be willing to sell for a bigger house or a social community to be a part of
• Between 20-to-30% said they wanted to explore a new area or live in a home with rental potential

For 53% of the participants, homeownership was the top indicator of financial success

Homeownership ranked number five in a list of top indicators of success. It came after being healthy, having personal growth, strong relationships, and having a good work-life balance. It came before career fulfillment, having a family, and reaching a certain amount of money in savings.

However, homeownership scored the first position in the list of top indicators of financial success, with 53% of respondents naming homeownership. Two-thirds of the surveyed homeowners said that owning a home was “one of their greatest achievements,” more than raising a family (50%) or being in a committed relationship (32%).

“There’s a clear desire for homeownership, but for some, it has become more challenging to achieve due to current market realities,” Vernon said.