Homebuyers are facing rising mortgage rates head on with just 5 percent of more than 1,300 people planning to buy a home during the year, saying that they would call off their search for a home if rates rose above 5 percent. This according to a May survey by Redfin of more than 4,000 people who had bought or sold a home in the last year, attempted to do so or planned to buy a home soon.
“Most of the pressure buyers are feeling is from competition for a very limited number of homes for sale,” said Taylor Marr, Senior Economist at Redfin. “The fact that such a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent reflects their determination to be a part of the housing market.”
Among the 1,300 potential homebuyers surveyed by the real estate broker, 24 percent said an increase in rates would have no impact on their search.
The survey targeted 14 major metro areas that included Austin, Baltimore, Boston, Chicago, Denver, Dallas-Fort Worth, Denver, Los Angeles, Phoenix, Portland, Sacramento, San Diego, San Francisco, Seattle, and Washington D.C. Redfin had commissioned similar surveys in November and May 2017.
The survey revealed that if mortgage rates were to rise above 5 percent, 32 percent homebuyers would slow down their search to see if rates came down again, up from 29 percent during the same period a year ago.
“Homebuyers are well aware that higher mortgage rates mean higher monthly payments, but mortgage rates remain very low, historically, and buyers will make compromises,” Marr said.
Inventory pressures are also weighing on buyers’ minds with 21 percent respondents saying that despite rates going up they would look for a home in another area or buy a smaller house; up from 18 percent a year ago.
A lesser number of respondents, 19 percent said that they would increase their urgency to buy before rates went up further, the survey indicated, decreasing from 23 percent last year.