A new survey reveals that Americans are woefully misinformed about the country’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 NerdWallet, the personal finance company. On average, they expect to spend $269,200.
But that figure is more than $100,000 lower than the median home price, which was $388,100 in December, according to real estate brokerage Redfin. Home prices crossed the $269,000 threshold in 2013, according to Federal Reserve statistics.
If potential buyers seem oddly optimistic about prices, it may be because they are pessimistic about the state of the housing market. Two-thirds of Americans surveyed said they expected an imminent crash.
Real estate economists do not. Lawrence Yun, chief economist of the National Association of Realtors, forecast an average selling price of $385,800 this year, about the same as last year. Redfin predicts a 4% drop: bad news for sellers, but hardly a crash.
“Home prices have already fallen, especially on the West Coast, and prices will fall in some cities in 2023,” said Holden Lewis, real estate and mortgage expert for NerdWallet. “But a drop in house prices is not necessarily a crash.”
Another puzzle: 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 mortgage hit 6.15% last week, according to the Fed. This is higher than most mortgage rates in recent years, which have sometimes been below 3%.
But it is not without precedent. Over the past 50 years, NerdWallet reports, 30-year mortgage rates have averaged 7.75%. Mortgage rates in the 6-7% range were common as recently as 2008.
Homebuyers have been surrounded by historically low interest rates for more than a decade. The Fed cut rates dramatically during the Great Recession of 2008 to stimulate the economy, a campaign that has continued, intermittently, throughout the COVID-19 pandemic.
Rampant inflation has caused a series of dramatic hikes in 2022 that have brought mortgage rates back to “normal” levels, at least in a historical sense.
The new survey of 2,051 American adults, conducted by the Harris Poll for NerdWallet, is the latest iteration of an annual poll. Pollsters have found overconfident homebuyers for several years in a row.
“We’ve known for the past five years that about 10 percent of Americans say they’re going to buy a home in the next 12 months, which is extremely optimistic,” Renter said. “Part of that could be because they’re not aware of what’s going on 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 succeed: only 6 million existing homes sold in 2021.
The survey found more realism by asking respondents how their home buying plans went in 2022.
Seventy percent of Americans who planned to buy a home in 2022 did not make it. Some of them made offers which were not accepted. Others put their plans aside because they couldn’t find affordable housing.