Think home inventory will see a big boost as owners gear up for the spring shopping season? Survey results from Redfin suggest otherwise.
In a poll of more than 1,900 homebuyers across 22 major metro areas, the online broker found 39 percent of homeowners have plans to rent out their existing home after buying a new place—limiting the number of supply coming to the market.
The shift among homeowners stems largely from today’s lower mortgage rates, explains Redfin agent Taylor Connolly, who operates in Baltimore: “Many of my homebuying clients refinanced and locked in a very low mortgage rate in recent years. That low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month, so they are going for it.”
Connolly added that for some shoppers, it’s simply a matter of hedging their bets: “Keeping their old home means they won’t have to risk becoming temporarily homeless like those whose homes sell quickly, but can’t find a new home before they have to move out.”
That’s a sentiment shared by 27 percent of those surveyed who said they plan to buy a home before selling their own.
Chief among buyer concerns this quarter are “low inventory” (which attracted 61 percent of responses), “rising prices” (57 percent), and “competition” (53 percent).
Overall, only one-quarter of survey respondents said now is a good time to buy a home, down from 40 percent at the same time last year. Fifty-two percent said it’s an “okay” time to buy, up from 45 percent at the start of 2013.
Also ranking high among shopper complaints is the upward trend in mortgage rates—one that threatens to impact demand. More than a third (37 percent) of buyers said interest rates above 5.0 percent could make them reconsider buying right now.
“No wonder the rental market is so strong,” said Redfin analyst Ellen Haberle.
Freddie Mac’s latest Primary Mortgage Market Survey shows the average 30-year fixed rate edging up to 4.37 percent as of February 27, and the company’s February outlook projects rates approaching 5.0 percent by year-end.
In a survey conducted late last year, Redfin found the vast majority—83 percent—of respondents believe a “normal” mortgage rate should fall under 5.0 percent, with 42 percent saying they would be unable or unwilling to buy a home should rates climb further.