On March 20, Dr. Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, appeared before the House Committee on Financial Services Subcommittee on Housing and Insurance. During the hearing titled "The Characteristics and Challenges of Today's Homebuyers," Lautz shared with members of Congress NAR's existing home sales research which confirms the housing market continues to have a deficit in housing inventory compared to housing demand.
Lautz emphasized that in 2023, the annual number of existing home sales was at the lowest recorded since 1995. While January 2024 shows an increase in home sales, this follows a retraction in the housing market due to limited inventory and an erosion in housing affordability.
Lautz indicated that the housing market continues to have a deficit in housing inventory compared to housing demand. In January of 2024, 1.1 million existing homes were available on the market. In comparison, in March of 2020, 1.49 million existing homes were available for purchase. As a consequence of the underproduction of new homes, the typical age of homes purchased was 38 years, and 85% of homes purchased were existing homes, as opposed to newly built homes.
NAR's research confirms bidding wars for homes are more frequent due to the lack of housing inventory, said Lautz. She outlined research from the association showing that in January 2024, the typical seller received 2.7 offers, and 16% of homes sold were over the list price. Further, she explained that home prices continue to rise because of the lack of inventory, pushing more potential buyers out of the market.
Home prices continue to rise due to constrained housing inventory. From March 2020 to January 2024 existing home prices have climbed 35.7% while household family income has climbed 22.9%. In the fourth quarter of 2023, 15% of metro areas had double-digit home price gains.
"First-time home buyers continue to struggle to enter the housing market lacking the housing equity that boosts the purchasing power of repeat buyers," Lautz testified. "First-time buyers accounted for 32% of primary residence buyers last year, which remains well under the historical norm of 40%. While there is a smaller share of first-time buyers, they are also older than they have been historically. In the 1980s, the typical first-time buyer was in their late 20s; however, they are now in their mid-30s. Among first-time buyers who can enter the market successfully are those with household incomes of nearly $25,000 more than those of the year prior."
Lautz also noted the homeownership rate has risen for each racial and ethnic group in the last decade, with Asian and Hispanic households at all-time highs, but there still remains a 28% percentage point difference in the homeownership rate between white and Black/African American households. These racial groups are more likely to be first-time homebuyers with the benefit of housing equity to contribute to the purchase of a home.
The typical homeowner has benefitted from the rise in home prices. The typical net worth of a homeowner in 2022, as reported by the Board of Governors of the Federal Reserve, is just under $400,000, compared to just over $10,000 for a renter.
"The wealth held by homeowners is 40 times that of a renter," Lautz said. "Housing wealth can be used to help children attend college, pay for remodeling costs on the home, in retirement or even help their own children achieve the dream of homeownership. Homeownership also comes with a number of social benefits, such as educational achievement, civic participation, health benefits, property maintenance and improvement."
Along with NAR, representatives from the Mortgage Bankers Association and the National Fair Housing Alliance were present for the hearing.
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