Just 6% of homebuyers would cancel plans to buy if mortgage rates surpassed 5%
Just 6 percent of prospective homebuyers would halt their home search if mortgage rates rose above 5 percent, according to a late-2017 survey commissioned by Redfin. This represents a modest one-point increase in the portion of buyers who responded this way to a similar survey question in May, revealing that buyers remain unfazed by the prospect of rising mortgage rates.
After hovering below 4 percent at the end of 2017, the average 30-year fixed mortgage rate surpassed 4 percent in January and has been steadily rising, reaching 4.32 percent at the time of this report’s publication. Mortgage rates are expected to continue to rise in the coming year.
Twenty-seven percent of respondents who plan to buy a home in the coming year said that a 5 percent mortgage rate would cause them to slow their plans to buy, down two points from May. A quarter said such a hike would have no impact on their plans, consistent with the May survey findings. Among prospective buyers responding to the late-2017 survey, 21 percent said a rate bump to 5 percent would cause them to increase their urgency to buy, while another 21 percent said they would instead look in more affordable areas or buy a smaller home.
The second in a series of three reports on a November/December survey of more than 4,000 people who bought or sold a home last year, attempted to do so, or planned to do so soon revealed the following key findings related to the housing market and the economy:
Respondents in California, where residents pay among the highest state, local and property taxes in the country, were even more likely to name high taxes as a top concern, with more than 40 percent of respondents in San Francisco, San Diego and Sacramento citing it. However, less than one-third of Los Angeles-based respondents cited high taxes as a top concern, though it was still the most common response.
By contrast, affordable housing was the most frequently cited economic concern among respondents in other parts of the country including Seattle (45%) and Portland (44%), where the income gap between the rich and poor ranked second and high taxes ranked third. Affordable housing also ranked highest among Denver-based respondents (46%), with high taxes following behind (30%).
The vast majority of respondents agreed that home prices will continue to rise in 2018. Only 6 percent of respondents said they expect any decline in prices, and only 1 percent said they expect prices to fall significantly. Most respondents (52%) said they expect prices to rise slightly, while another 25 percent said they expect a significant increase in prices and 17 percent said they expect no change at all.
To read the full report, complete with data, charts and a full methodology, click here.