Buckle up: More buyers may be on the way 

A record number of people are planning to purchase a home this year, which could make for a hot market if interest rates go down.

The latest National Association of Home Builders' Housing Trends Report found that 18% of adults in the U.S. are planning to buy a house in the next 12 months — the highest share ever for the survey, which began in 2018. The most recent survey was completed in the first quarter of 2023, and the share of would-be buyers was up from 13% in the fourth quarter of 2022. 

Pent-up demand and lower mortgage rates, relative to last fall, are factors in this renewed interest in home buying, said Rose Quint, assistant vice president for survey research at NAHB.

"There are millions of people waiting for the right conditions to purchase a home," Quint said in an email. "Covid-19 made them realize they needed the space, the features, the location, but competition was too stiff during Covid. Then, interest rates doubled. Now, with mortgage rates falling back from 20-year highs reached last fall, many are reconsidering engaging in the purchase process."

Competition could heat up unless more sellers decide to list

Many economists are expecting mortgage rates to go down in the second half of 2023 or early 2024 as the Federal Reserve eases up on interest rate hikes. If inventory remains low, the market could become even more challenging as more buyers compete for homes.

"However, lower interest rates would also lead many existing homeowners to list their homes for sale, which would then help alleviate the lack of supply," Quint said, noting that many potential sellers are out of the market because they are reluctant to give up their low mortgage interest rates.

Of those who want to buy a home, 37% prefer an existing home, while 21% want a new home and 42% have no preference. Those who want an existing home may find their options limited until more sellers decide to list.

The homebuyers actively looking are taking longer to find what they want, according to the report. Last quarter, 71% said they spent more than three months searching for a home, up from 65% in the final months of 2022. It's a sign that slightly lower rates have intensified demand, according to the report.

A 'typical springtime seller's market'

This trend is showing up in other data as well. The Zillow Home Value Index (ZHVI) was up 0.87% month over month, according to the company's March Housing Market Report. The ZHVI had dropped for six straight months following its July peak but began climbing again in January.

"This month's turnaround confirms that market conditions have swung from a slow seller's market in late 2022 to a typical springtime seller's market, with remarkable speed," said Jeff Tucker, a senior economist at Zillow.

The NAHB survey also found that 71% of those who said they are planning to buy a home this year are first-time buyers, which is also a record level for the report. That's up from 61% in the fourth quarter of 2022.

Broken down by region, the West (23%) had the highest share of adults saying they want to buy a home this year, followed by the Northeast (19%), the South (14%) and the Midwest (10%).

Quint said the West is popular right now because home prices are dropping more rapidly in that area. The combination of lower prices and interest rates that have fallen from their peak is helping to bring buyers back into the market.