Prospective buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
The housing market is currently facing several challenging dynamics, according to Tracy Kasper, the president of the National Association of Realtors. She describes the recent period as a “leveling” after experiencing significant year-over-year growth during the Covid-19 pandemic.
In light of fewer people selling their houses, Kasper highlights the existence of an “inventory crisis,” with first-time homebuyers particularly impacted.
Challenges for First-time Homebuyers
Kasper explains that first-time homebuyers struggled to compete with cash-rich buyers during the Covid-19 pandemic. Now, they face the difficulty of finding homes as current homeowners are hesitant to put their properties on the market and give up their existing low-rate mortgages.
Kasper notes that mortgage rates have soared to the highest levels in decades, making it difficult for first-time homebuyers to enter the market. Higher rates lead to higher monthly payments, which can make qualifying for a mortgage more challenging. Last year, lenders denied loan applications due to “insufficient income” at an unprecedented rate since records began in 2018, according to a recent report by the Consumer Financial Protection Bureau.
Barry Glassman, a certified financial planner and founder of Glassman Wealth Services, adds that average mortgage payments have outpaced income growth in most cases.
To address these obstacles, real estate insiders like Kasper are actively seeking ways to increase inventory, including advocating for government incentives such as tax breaks for sellers. Housing and banking groups have also urged the Federal Reserve not to consider further rate hikes.
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