Housing Demand Slows on Higher Rates and Prices

Mortgage rates’ slow –but steady– march upwards combined with the return of home price gains are doing what they are predicted to:  slow housing demand.  According to the latest Housing Trends Report, the share of adults with plans to purchase a home within a year dropped to 15% in the second quarter of 2023, down from a record high of 18% in the first quarter.

First-time buyers are disproportionately affected by elevated mortgage rates and home prices because they generally lack equity savings from a previous home sale to help with a down payment.  In the second quarter of 2023, the share of all prospective buyers who are in the market for the first time dropped to 61%, down significantly from 71% in the first quarter.

The share of adults with plans to buy a home in the next 12 months declined across all regions of the country between the first and second quarters of 2023: Northeast (19% to 18%), Midwest (14% to 13%), South (17% to 11%), and most significantly in the West (23% to 17%).

Similarly, the 1st-timer share lost ground in all four regions between the first two quarters of 2023: Northeast (66% to 61%), Midwest (67% to 61%), South (68% to 59%), and West (75% to 65%).

 *Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here.  This is the first in a series of six posts highlighting results for the 2^nd quarter of 2023.