Inventory Challenges Continue to Frustrate Buyers

Buyers’ expectations of inventory challenges getting easier in 2022 are not too optimistic.

According to the National Association of Home Builders, in the fourth quarter of 2021, only 24% of buyers said they believed finding a home would be easier in the future. Nearly two-thirds think the process will remain the same or become more challenging. The number of prospective buyers also dropped in the fourth quarter, from 17% in the second quarter to 16% in the third and 15% in the fourth. However, the interest of millennials and Generation Z of buying actually increased in the fourth quarter, rising from 16% to 19% for Generation Z and from 27% to 29% for millennials. Generation X saw a steep decline, dropping in interest from 18% to 12%, while boomers remained consistent at 5%. Expectedly, only 31% of buyers reported that they have noticed more homes for sale, down 10% year over year.

Buyers’ perceptions of affordability also dropped throughout 2021. More than three-quarters of buyers reported they could afford less than half of the homes in their markets, up 13% year over year. Across all generations, expectations of affordability fell, but Generation X especially saw a big increase, from 54% in the fourth quarter of 2020 to 80% a year later.

The pandemic impacted buyers’ demands for new homes, when 42% of buyers were looking for new homes (fourth quarter of 2020), but that number has dropped to 25% as of the last quarter of 2021, which is still an increase over pre-pandemic demand levels. Millennials were the generation most likely to be looking for new homes (28%).  However, the number of potential buyers fell throughout 2021, dropping from 61% in the second quarter to 52% in the fourth.

More than two-third of buyers (67%) said that they spent longer than three months looking for a home and 41% reported it was taking so long because they could not find an affordable property, while 39% said they couldn’t find a home with the features they wanted and 35% lost bidding wars. Yet, buyers remain hopeful, 49% said they would keep looking, while 26% said they would expand their budget.