The National Association of Home Builders (NAHB) says the main reason potential homebuyers have been unable to successfully strike a deal has reversed from a year ago.
In its year-end Housing Trends Report released in mid-February and based on commissioned surveys done by Morning Consult, the NAHB said being outbid by other offers was cited as the top reason for not being able to buy a home (40%) as opposed to not being able to find an affordably priced home (33%). That’s a dramatic flip from last year at this time, when the NAHB said only 19% said they lost bidding wars and 44% said prices were unaffordable.
So, the share of shoppers getting outbid has doubled in a year -- despite the economic shock of the coronavirus pandemic -- and now, for the first time in the survey’s history, the trade group says, being outbid takes the top spot as a reason for coming up empty in a homebuying search.
More giving up, more moving up, more downsizing expectations
Those numbers come from the subset of 69% of the respondents to the national survey who said during the fourth quarter of 2020 that they had been looking for a new home for as long as three months with no success.
The survey also found sharp changes in strategy among that 69% who had been looking for 12 weeks or longer to no avail.
While half of those long-time active searchers said they’ll keep on looking and 38% said they’ll expand their search area, about the same proportions as last year, the report said, there were some changes in strategy detected by the pollsters.
“The largest changes [between the final quarters of 2019 and 2020] come in the shares likely to give up until next year or later (16% to 28%), to buy a more expensive home (16% to 27%), and to accept a smaller/older home (19% to 28%),” the report said.
A continuing trend of putting the search aside, for now
The NAHB said that the rising trend in long-term searchers likely to quit looking for a home until next year or later is not new. In fact, it’s the fourth year-over-year rise in this metric, the trade group said.
The survey also detected some optimism: 37% of the fourth-quarter 2020 prospective homebuyers said they expect finding the right home to get easier in the months ahead, up from 23% year over year.
“The improvement in buyers’ perceptions on availability reflects the fact that more new and existing homes were sold in 2020 than in any year since 2006,” the NAHB report said.
The Millionacres bottom line
The 13-page report also delves into generational and regional differences among those subsets of prospective homebuyers, but the differences aren’t as dramatic as what’s happened among the group as a whole in the past year.
Sharply rising prices driven by historically low interest rates and inventory surely are sparking affordability concerns as well as bidding wars, but the supply of buyers, and the optimism expressed by even those frustrated shoppers, bodes well for the market in the months ahead.
How real estate investors -- including those looking to flip or to invest in rentals -- respond to all these strategic shifts on the part of prospective homebuyers is obviously an individual choice, but it does appear the seller’s market will be with us for a while.