A new Zillow survey says it’s uncovered the mortgage rate tipping point that will make homeowners more likely to move and help unlock the housing market.
The survey found that homeowners with a mortgage rate above 5% are nearly twice as likely to say they plan to sell their home than those paying a rate below 5%. The survey also found about 80% of mortgage holders reported having a rate of less than 5% and about 90% have a rate of less than 6%. Almost one-third reported a rate of less than 3%.
With rates still hovering in the high sixes that doesn’t leave a lot of wiggle room. The company also reported 28% fewer for-sale listings hit the market in June than one year ago.
"We expect mortgage rates may notch down slightly as inflation comes under control, but they are unlikely to return to 5% in the near future," said Orphe Divounguy, a senior economist at Zillow Home Loans. "That means many homeowners will move only for major life events, like a new baby or retirement. Over time, homeowners will likely accept higher rates as the new normal, but until then, the market could remain challenging for home shoppers, who will see fewer options and higher prices."
But there’s still hope. A separate survey by Zillow found that 23% say they are either listing their home for sale or considering selling their home in the next three years. That’s up from 19% in the first quarter and 15% from a year ago. Of those planning to list their home, four in 10 said they are considering selling in the next year.
Amid a continuing scarcity of available homes, the nation's real estate market is facing an unprecedented surge in prices. According to Zillow's newest monthly market review, June saw average home values reach an all-time peak, exceeding $350,000 on a national level for the first time ever. This upward trajectory isn't confined to isolated pockets either; the 50 largest metropolitan areas have reported a climb in home values for the second consecutive month.
This escalation in prices is not without consequences, particularly for aspiring homeowners. They now find themselves grappling with the dual challenges of these soaring property values and the present day's elevated mortgage interest rates. To put it in perspective, the monthly mortgage payment for a typical homebuyer is now more than double what it was in 2020 and has grown by 13% compared to last year. Affordability is clearly no longer just a buzzword but a serious hurdle in the homeownership journey.
Despite these formidable barriers, potential buyers are far from giving up the dream. In fact, they are demonstrating resilience and ingenuity in their pursuit of homeownership. A recent survey conducted by Zillow Home Loans highlights that almost half of all buyers are employing strategies like buying points to reduce their interest rates and, consequently, their monthly payments.
