Potential homebuyers are being ushered into the housing market for two reasons: life events and rising rental rates.
According to a survey of 750 buyers from Redfin, as of the first quarter of 2016, 25 percent of homebuyers are most influenced to purchase due to a rise in rent, while 29 percent say that life events affected their decision. Last quarter, 21 percent said rent was too high, while 25 percent blamed their choice on life events.
But homebuyers are faced with more concerns when looking to evade rising rents, the report said. With home price continuing their upward trek, affordability is a concern among 25 percent of those surveyed, down one percentage point from 26 percent in the fourth quarter of 2015.
Inventory, or the amount of homes to choose from, is an issue for 20 percent of respondents, up from 16 percent in the fourth quarter, according to Redfin. Meanwhile, 16 percent of those surveyed cited competition as a concern in the first quarter of 2016, up from 11 percent last quarter. Nine percent showed no concern about buying, down 1 percentage point.
The Redfin survey showed that 53 percent of buyers anticipated that home prices would increase soon, while only 48 percent of respondents said the same in the previous survey. Of those indicating that prices would rise, 13 percent said that they would increase significantly, compared to 10 percent previously.
As bidding wars are concerned, 60 percent of buyers said they would remain discipline, but would consider paying a little more. This number is up from 58 percent last quarter and 55 percent in August. On the other hand, 27 percent said they would step back to avoid overpaying, while 12 percent would compromise on a lower-priced or less-competitive home. A small 1 percent of those surveyed said they would be willing to pay more for a home to get it.
Mortgage rate remain a concern and influencing factor in homebuyer's decisions, with 67 percent of buyers noting that mortgage rates were important or very important in their decision to buy, up from 65 percent in November.
"With the Federal Reserve’s December rate hike in the rearview mirror, buyers are now more confident that rates will stay roughly the same in the next six months. Only 10 percent felt they would increase significantly, compared to 14 percent in our last survey," Redfin said.
Homebuyer sentiment remains positive, with 33 percent of those surveyed indicating that they are more inclined to buy compared to last year, up 1 percentage point from the last survey. Meanwhile, 31 percent of buyers felt an increased urgency to buy before prices or mortgage rates rose, down one percentage point compared to last quarter.