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Top 5 reasons buyers have trouble closing on a home

May 18, 2021
/ by 
Elizabeth Mixon
Top 5 reasons buyers have trouble closing on a home

The real estate market boomed in 2020. The market is more than ideal for sellers but has proven difficult for buyers who are looking for a new home. So, how did we get here and what are the top reasons that buyers are seeing continuous issues closing? Let’s discuss.


1. Being Outbid


Being outbid when making an offer on a home is the number one reason buyers can’t close on a home. According to the National Association of Home Builders Housing Trends Report, 45% of buyers now can’t close on a home because they’re being outbid. In 2019, only 23% of buyers cited getting outbid as the reason they couldn’t close on a home. 


This issue is particularly problematic for Millennials who are more outbid than any other generation. Over 51% of Millennials have reported being outbid when trying to purchase. Whereas only 5% of Boomers, 37% of Gen X, and 40% of Gen Z report encountering the same problem. And this issue has only grown. In 2019, only 25% of Millennials reported being outbid as the top reason they couldn’t close. The numbers are rising, big time.


2. Affordability


Prices on homes have also gone up. This means that affordability has developed as another top reason buyers can’t close on a home. Over 32% of buyers who have struggled to close on a home cited trouble finding a home in their price range as the main reason. 


This is a particular issue for first time home-buyers who lack the equity for a down payment. With interest rates at record lows, 61% of homebuyers across the nation are first-time home-buyers. The Northeast has the largest share of first-time homebuyers with over 65%.


The good news is that things are looking up on this front. Affordability is up from a year prior. 35% of buyers can afford half or more of the houses in their area. In the first quarter of 2020, only 23% of buyers could afford half or more homes. So, while it continues to be a challenge, affordability is increasing and may allow more first timers to get a good deal.


3. Inventory


Following getting outbid and affordability, the next most common reasons buyers can’t close on a home is due to a lack of inventory. Buyers either can’t find a home with the features they want or in the neighborhood they desire. 


There are dramatically fewer homes for sale now than before the pandemic.

61% of buyers don’t expect this to improve in the near term. That may seem like a big number, but it’s actually better than last year. This is in part due to more homes being sold in the first quarter of 2021 than in the same period of 2020.


As of now, 33% of buyers expect inventory to improve – compared to only 25% last year. Millennials are the most optimistic group with 40% expecting inventory to improve near term. 

To combat the inventory shortage, 50% of buyers are planning to expand their search area. 28% of buyers have decided they’re happy to settle for an older or smaller house than they originally wanted. And, 25% of buyers are willing to spend more than they originally planned on a home. 


4. Demand


Historically low housing inventory and interest rates, plus more time in small spaces, plus a surge in active home buyers can only mean one thing—a demand issue. The share of adults planning to buy a home in the next 12 months has increased to 16%, a 6% gain from a year ago. This is the largest year-over-year gain in the history of the housing trends report!


Millennials are leading the surge in demand. As of 2021, 32% of Millennials plan to purchase a home in the next 12 months. That’s double the 16% of Millennials that planned to buy in 2020. Baby Boomers saw the smallest change in demand – from 5% in 2020 to 6% in 2021. 


5. Long Search Time


The last reason buyers are struggling to close on homes is that it is just taking a long to find one. 64% of buyers have to spend 3 or more months searching for a home. That’s up from 56% a year earlier. Millennials are spending more time looking than any generation. 67% of Millennials who are searching for a home have spent more than 3 months doing so. That’s up from 53% in the first quarter of 2020. 


The long search has led to more buyers taking a break from the market. 25% of buyers will put off their home search for a year or more due to the search process taking so long. That’s up from 16% a year prior. But, they’re not quitting for long. The number of buyers quitting their home search is down from 28% in the fourth quarter of 2020.


Wrapping It Up


All these issues compounded have created quite a few obstacles for buyers in the market. Even so, there are more buyers looking to purchase than years before. To ensure your client is able to get the home they love, they need a leg up. RibbonCash Offers can help. By turning your offer into a seller preferred cash offer and eliminating contingencies, Ribbon is able to help clients avoid being outbid and cutting the home buying timeline significantly.


Learn more about how Ribbon can help you today.

Written by: 
Elizabeth Mixon
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