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72% OF CONSUMERS SAY THEY ARE WILLING TO BUY IF RATES DIP BELOW 6%
Here’s what the survey said:
- 18% of consumers are willing to buy a home with a mortgage rate below 7%.
- 22% are willing to buy with a rate below 6%.
- 32% are willing to buy with a rate below 5%.
- 18% are willing to buy with a rate below 4%.
Here’s why this is important. While rates are hovering around the low 7s and high 6s right now, that means this data shows that most people won’t even consider buying or selling a home right now.
But what a lot of consumers may not be factoring in when they decide to wait is that experts project home prices will continue to appreciate. That means, buyers may end up paying for the house (thanks to home price appreciation) if they try and wait it out.
Mortgage rates play a pivotal role in determining the affordability and overall cost of homeownership, but they are only one of the most important pieces of the affordability puzzle – they aren’t the only piece.
A lot of consumers are getting stuck looking at the handle, the first number of a mortgage rate, instead of fully understanding what a small change could mean.
For example, using this Purchasing Power Tool, we can see the impact of mortgage rates going all the way from 7.5% to 5.5% for a home.
For simplicity’s sake, let’s just focus on a $400,000 home loan amount.
Okay, now let’s look at what the payment would be if we drop that mortgage rate to 6.5%.
If we bring it down to 6%, that would mean an additional decrease of $130 per month compared to the 6.5% mortgage rate.
With people so focused on the handle right now, this context is extra important.
Plus, if you add in the fact that home prices are expected to continue rising over the next five years, waiting for that small dip in mortgage rates may not make a difference. Or worse, it could mean they end up paying more each month for essentially the same house.
