(The Hill) – A new survey finds Americans are woefully misinformed about the nation’s mercurial housing market, even as millions of them prepare to buy homes.
Twenty-eight million Americans plan to buy a home in 2023, according to a survey released Tuesday by personal finance company NerdWallet. On average, they’re hoping to spend $269,200.
But that figure falls more than $100,000 below the median home price, which was $388,100 in December, according to real estate brokerage Redfin. Home prices passed the $269,000 mark in 2013, Federal Reserve statistics show.
If potential home buyers seem unusually optimistic about prices, it could be because they’re pessimistic about the state of the housing market. Two-thirds of Americans polled said they expect an accident to happen imminently.
Real estate economists don’t. Lawrence Yun, chief economist at the National Association of Realtors, expects an average sale price of $385,800 this year, about the same as last year. Redfin expects 4% drop – bad news for sellers, but hardly a slump.
“Home prices are already falling, especially on the West Coast, and prices will drop in some cities in 2023,” said Holden Lewis, home and mortgage expert for NerdWallet. “But a drop in home prices isn’t necessarily a crash.”
Another headache: 61% of Americans told pollsters that current mortgage rates are unprecedented, meaning they’ve never been seen before.
“We actually defined it,” said Elizabeth Renter, data analyst for NerdWallet.
The average rate for a 30-year fixed-rate mortgage hit 6.15% last week, according to the Fed. That’s higher than most mortgage rates in recent years, which have sometimes been as low as 3%.
But it’s not without precedent. Over the past 50 years, NerdWallet reports, 30-year mortgage rates have averaged 7.75%. Mortgage rates between 6 and 7 percent were common until 2008.
Homebuyers have been basking in historically low interest rates for more than a decade. The Fed cut rates sharply during the Great Recession of 2008 to stimulate the economy, a campaign that has continued, on and off, during the COVID-19 pandemic.
Runaway inflation has prompted a dramatic series of hikes in 2022, which has returned mortgage rates to “normal” levels, at least in a historical sense.
The new survey of 2,051 American adults, conducted by Harris Poll for NerdWallet, is the latest iteration of an annual survey. Polls have found overconfident home buyers for several years in a row.
“We know that over the past five years, about 10 percent of Americans say they will buy a home in the next 12 months, which is extremely optimistic,” Renter said. “Part of it could be that they’re unaware of what’s happening in the housing market.”
Nearly 30 million Americans plan to buy a home in 2023. In all likelihood, only a small percentage of them will be successful—just 6 million existing homes sold in 2021.
The survey found more realism when it asked respondents how their home buying plans had played out in 2022.
Seventy percent of Americans who had planned to buy a home in 2022 have failed. Some of them made offers which were not accepted. Others shelved their plans because they couldn’t find affordable homes.