Mortgage Rates Above 3.5% Create 'Sense of Urgency'
Nearly half of house hunters would be more inclined to buy, according to a Redfin survey.
US mortgage rates last week rose to their highest levels since May 2020, driving up the costs associated with home buying at a time when home-sales prices are already near record highs.
The average rate for a 30-year fixed-rate loan was 3.22%, up from 3.11% the prior week, according to mortgage finance giant Freddie Mac. A year ago, mortgage rates stood at 2.65%.
Almost half (47%) of house hunters say they would feel more urgency to buy a home if mortgage rates rose above 3.5%, according to a report released last week from real estate brokerage Redfin.
A lower share (29%) would look for homes in different areas or consider smaller houses, while 14% would slow their search in hopes of rates coming down again, Redfin said in its report.
Meanwhile, 7% of respondents wouldn’t change their plans at all. Just 2% said they would cancel their plans to purchase a home if mortgage rates surpassed 3.5%.
The Redfin-commissioned survey asked 1,500 US residents planning to buy or sell a home in the next 12 months. This report focuses on the 1,092 of those respondents who indicated they were planning to buy a home in the next year. The survey was fielded by research technology company Lucid from Dec. 10 to Dec. 13, 2021.
Redfin Projects Mortgage Rates at 3.6% by Year End
Redfin Chief Economist Daryl Fairweather said he expects rates to hit about 3.6% by the end of 2022.
“Mortgage rates increasing will make home buying less affordable. Over time, that will put the brakes on demand and put an end to double digit annual price growth,” Fairweather said in prepared remarks. “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.”