Market Survey: Affordability Impeding Buyer Activity

Some Buyers Miss the Finish Line

Transactions have slowed in the Mid-Atlantic as the demand pool shrinks in the face of affordability challenges. With mortgage rates stuck near 7% and home prices continuing to rise, financing is a growing challenge for buyers. The percentage of agents and brokers working with listing clients who have had a contract fall through due to buyer financing has grown in recent months, now standing at 13.7% according to Bright MLS’s July 2024 subscriber survey.

By comparison, the share of contracts falling through due to appraisals is lower and has been fairly steady over the past few months.
 

 

Other Buyers Move to the Sidelines

Would-be buyers have been waiting in the wings for a variety of reasons, and some who started the homebuying journey have stopped looking. Affordability is the main reason homebuyers are dropping out. In recent months, the top reason buyers have paused or stopped was high home prices. According to one agent responding to the survey, “Buyers this year have mentally adjusted to rates and now are pursuing homes in the next lower price point to where they were looking in the last 3 years.”
 

 

High mortgage rates follow closely behind high home prices as a reason why buyers pause or stop their home search. The combined higher rates and higher home prices have meant monthly payments have risen much faster than incomes. Other reasons buyers are stepping out of the market are frustration with offers, not finding the right home, needing to save more for a down payment, and economic uncertainty.

Optimism About Buyer Activity Falls

Agents and brokers understand that affordability is a major challenge and fewer buyers are able to purchase now than were when rates were lower. In July, the buyer activity index dropped again, to 53.7. This index compares the number of agents and brokers who anticipate high to very high activity in the coming three months to the number expecting low to very low activity. Part of the decline is tied to market seasonality; the third quarter of the year typically isn’t as productive as the second. Currently the buyer index is nearly seven points lower than July 2023 and expectations could fall further. However, brokers and agents are hoping interest rate cuts will spur more buyer activity. One agent who is hopeful for the future indicated, “Activity will be determined by rate cuts. Once the rates are cut, buyers will come back to the market.”
 

 

The seller index, though pessimistic, has been significantly stronger than last year. More new listings are coming online, and sellers are generally pleased with the process and price they receive. Supply should improve further as this trend continues compared to dwindling buyer activity.

Inventory Starting to Ease Conditions—but Sellers Aren’t on the Back Foot

Prices continue to trend higher yet there are winds of change as inventory grows. With additional options available, more buyers have succeeded with one offer now (38.0%) than a year ago (31.2%). Further, only 28.6% of buyers in June 2024 said submitting a successful offer was somewhat or very difficult compared to 34.8% in June 2023. However, the increase in inventory hasn’t made finding the right home significantly different.

Sellers still have the upper hand. On average, sellers received 3.0 offers in June 2024. Sellers are also satisfied with the price they receive (89.1%). Life changes and sellers wanting to cash in on equity will add more homes to the Mid-Atlantic market. Whether buyers can take advantage of listings coming online will be determined by how they can face affordability obstacles.

About Bright

Bright is proud to be the source of truth for comprehensive real estate data in the Mid-Atlantic, with market intelligence currently covering six states (Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia) and the District of Columbia. Bright MLS’s innovative tool library—both created and curated—provides services and award-winning support to well over 100k real estate professionals, enabling their delivery on the promise of home to over half a million homebuyers and sellers monthly. In 2023, Bright subscribers facilitated $104B in real estate transactions through the company’s platform.

A total of 531 agents representing recent homebuyers and 649 agents representing recent home sellers responded to Bright MLS’s survey. The survey was conducted between July 8 and July 15, 2024. Full survey results are available here. More research and analysis on the housing market is available from Bright MLS’s Research Team.