A survey conducted by Redfin found that house hunters would feel much more pressure to purchase a home if mortgage rates increased over the 3.5% mark. The survey found that it would also reshape the way some of these respondents search for a home.
For instance, 29% of respondents said they would look for homes in a different area or consider smaller houses if rates were to move past the 3.5% mark. Another 14% said that they would bring their search to a slow.
Meanwhile, 7% say that the rate increase would have no effect on their plans to purchase a home and 2% would cancel their homebuying plans altogether.
The urgency may be approaching much sooner than house hunters think. Recently, the Federal Reserve mentioned that a rate hike would likely come in June and Consensus Forecasts point to rates hitting 3.7% by Q4 2022.
The interest rate on a 30-year fixed mortgage rose to 3.22% during the first week of 2022 from 3.11% the prior week. That’s the highest level since May 2020, when the pandemic was just beginning.
“Mortgage rates increasing will make homebuying less affordable. Over time, that will put the brakes on demand and put an end to double-digit annual price growth,” said Redfin chief economist Fairweather. “But in the short term, this increase will light a fire under homebuyers and make for an extremely competitive January.”
Rising rates are the main driver for homebuyers in Houston right now, according to local Redfin real estate agent Faith Floyd.
“Buyers are worried mortgage rates will go up and they’ll no longer be able to afford a home,” Floyd said. “They also feel a sense of urgency because they don’t want to have to compete with spring and summer buyers and end up overpaying five months down the road.”
The potential for higher mortgage rates is motivating sellers to act quickly as well, according to Seattle Redfin agent Shoshana Godwin.
“Sellers want to get their homes on the market ASAP,” Godwin said. “They’re concerned that if rates rise too much, it could impact their chances of getting good offers since buyers may be worried about overall costs increasing.”
The survey featured responses from 1,500 U.S. residents planning to buy or sell a home in the next 12 months.
