“My girlfriend and I have great jobs, but when we look at house prices in L.A., we feel poor.” –First-time homebuyer
High prices and competition edged out limited inventory as the top concerns for homebuyers in the second quarter, with selling a current home and saving for a down payment rounding out the list in a Redfin survey. That’s a shift in sentiment from this time last year, when almost half of buyers said there weren’t enough homes to choose from and a bigger share cited rising mortgage rates and shopper’s fatigue.
Affordability was far and away everyone’s biggest worry. Nearly 27 percent of the more than 3,500 buyers we heard from last month listed high or rising prices as their top concern. Another 17 percent were apprehensive about competition from other buyers.
It’s not surprising. Home prices were up 5 percent in June from a year ago and the number of Redfin offers facing competition increased to 55.3 percent from 54 percent, our data show.
First-time buyers were especially sensitive to price growth, with 31 percent listing it as their top concern.
Repeat Buyers Now More Likely to Sell First
Forty-four percent of repeat buyers said they plan to sell before buying, up from 23 percent a year ago. At the same time, more people cited competition as their top concern about buying, rather than inventory.
Redfin agents say the sell-first tactic frees up cash and makes buyers more nimble in a fierce marketplace. It also gives them an advantage over rivals who haven’t yet sold their current home but will need to before they can close on the next one.
“Buyers want to do everything possible to be competitive,” said Stuart Naranch, a Redfin agent in Washington, D.C. “One way to do that is avoid making an offer contingent on the sale of their current home.”
The lure of being a landlord is also losing appeal. Repeat buyers in this survey were half as likely as those last year to rent out their current homes once they moved. Rising prices mean many of them probably need the equity to pay for their next house.
Price Gains Are Slowing
The market has been tough on buyers for a while now, but that might be changing. Forty-four percent of buyers in our survey thought home prices will hold steady or fall in the next six months, up from 29 percent a year ago. Fewer than one in 10 expect prices to rise more than 5 percent. That sentiment is in tune with the Redfin Housing Demand Index, which forecasts a significant slowdown in home prices in August.
What about Mortgage Rates?
Mortgage costs weren’t high on buyers’ minds despite repeated signals that the Federal Reserve will raise interest rates before the end of the year. That said, cheap borrowing remains a key driver for buyers, three-fourths of whom said mortgage rates were either “very important” or “important” in their decision to buy.
This survey was conducted between July 27-29, with responses from 3,577 Redfin customers in the following U.S. markets: West: Albuquerque, Bend, Boulder, CO, Colorado Springs, Denver, Fresno, Hawaii, Los Angeles, Las Vegas, Orange County, CA, Phoenix, Portland, Riverside-San Bernardino, CA, Sacramento, San Diego, San Francisco, San Jose, CA,, Seattle, Tacoma, WA, Tuscon, Ventura County, CA; South: Atlanta, Austin, Baltimore, Charlotte, Charleston, SC,, Columbia, SC, Dallas – Fort Worth, Columbia, SC, Fort Lauderdale, Greenville, SC, Hampton Roads, VA, Houston, Jacksonville, Knoxville, TN, Memphis, Miami, Nashville, Oklahoma City, Orlando, Raleigh-Durham, Richmond, VA, San Antonio, St. Louis, MO, Tampa, FL, West Palm Beach, FL; Midwest: Chicago, Detroit, Indianapolis, Louisville, KY, Madison, WI, Milwaukee, Minneapolis-Saint Paul, New Orleans, Omaha, NE, St. Louis, MO, Salt Lake City, UT; Northeast: Allentown, Baltimore, Boston, Bronx, Buffalo, NY, Long Island, NY, Portland, ME, New Hampshire, New Jersey, Philadelphia, Pittsburgh, Queens, Providence, RI, Washington, D.C.-MD-VA, Staten Island, NY.