High home prices and mortgage rates continue to delay prospective home buyers across all races and ethnicities, according to the National Association of Realtor’s (NAR) 2023 Experiences & Barriers of Prospective Home Buyers Across Races/Ethnicities report in partnership with Morning Consult. Surveying Asian, Black, Hispanic/Latino(a), and white prospective home buyers, the top reason all groups have postponed buying a home is high prices, at 27%, 20%, 24%, and 15%, respectively.
“Home buyers face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates,” says Jessica Lautz, NAR’s deputy chief economist and vice president of research. “The impact is exacerbated among first-time buyers who are more likely to be from underrepresented segments of the population.”
White respondents (15%) are equally as likely to say they are waiting for mortgage rates to drop. Prospective home buyers across all groups also cite not enough available homes within their budget (19% to 24% of all four groups) and waiting for mortgage rates to decline (18% to 25% of all four groups) as barriers.
Likewise, in NAR’s 2023 Experiences & Barriers of Prospective Home Buyers: Member Study, Realtors note the same barriers as consumers, with not enough homes available for purchase in buyers’ budgets (34%), buyers waiting for mortgage rates to drop as higher prices affect affordability (18%), and buyers waiting for prices to drop (9%).
As these three factors greatly impact affordability, saving for a down payment is also a primary obstacle for home buyers at 6% to 9% across all four groups, with current rent or mortgage payments (43% to 56% of all four groups) and credit card payments (38% to 57% of all four groups) noted as hindrances to saving for a sufficient down payment.
The report found that awareness about existing down payment assistance programs is low among prospective buyers who are saving, with only 8% to 15% of all four groups having applied for these programs; 20% to 33% considering the programs but not applying; 21% to 32% not considering these programs; and one-third (30% to 33% of all four groups) saying they are not aware of these assistance programs. For those aware of down payment assistance programs, the primary reason they did not apply is because they did not know enough about them (44% to 58% of all four groups).
“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. 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,” adds Lautz.
Fifty-three percent of Realtors say current rent or mortgage payments (23%) or credit card balances or payments (17%) are holding their latest buyers back from saving for a down payment. Only 23% of Realtors say that their buyers experiencing these obstacles have applied for down payment assistance programs, with the reasons most likely being because their income is too high (30%); they did not know enough about the programs (19%); or they are worried about the competitiveness of their offers in multiple-bid situations (17%).
During the home buying process, about 1 in 6 (13% to 16% of all four groups) prospective home buyers across races and ethnicities report facing discrimination, according to the report. More than half of Black (63%), Asian (60%), and Hispanic (52%) prospective home buyers who note this say it was due to their race or ethnicity. Of the share, the largest proportions of every group are most likely to report that this discrimination comes in steering toward or away from specific neighborhoods (36% to 51% of all four groups) and more strict requirements (32% to 48% of all four groups). Of those who noted discrimination, 47% to 81% did not report it to a government agency or legal aid organization.
According to the NAR member study, only 1% of Realtors who took the survey report that their buyers experienced discrimination during the home buying process, while 13% are not sure. Those reporting discrimination are most likely to say this is based on race or ethnicity and lay this at the feet of lenders, saying that buyers experienced this in the type of loan product offered (43%) or that they did not receive a call back from lender(s) (29%).
Of those who report discrimination, 57% say it is based on race, 29% cite age, and 21% say it is based on familial status (including marriage or parental status). Seven percent say the buyer reported the discrimination, which was based on either race or religion or both, to a government agency or legal aid organization.