Waiting for better rates
Many millennials and Gen Z individuals have put off purchasing a home due to high mortgage rates, with Gen Z showing particular caution. Gen Z respondents are more inclined towards renting and are more likely to delay buying a home compared to September 2024.
A majority of survey respondents (67%) stated that mortgage rates have influenced their decision to buy a home. Baby boomers seem to be less affected, with only 41% saying that rates do not impact their plans. Interestingly, only 2% of all respondents are considering buying a home if mortgage rates exceed 6%, while most (63%) are waiting for rates below 5% before making a purchase.
Laura Eddy, vice president of research and insights at Realtor.com, noted, “Despite current market challenges and persistently high mortgage rates, Millennials are showing a notable increase in home buying interest this spring compared to last fall. The influence of mortgage rates is significant, with the majority of Americans, including Millennials, prioritizing lower rates before committing to a purchase. The lock-in effect is still very much in effect.”
The survey also delved into how people finance home purchases. A majority (57%) use personal savings, while 15% tap into personal investments or retirement accounts, and 12% rely on gifts or loans from family members. Among those planning to buy a home, one in four intends to use retirement accounts or personal investments for financing.
Sellers cautious but motivated
A separate survey by Realtor.com revealed that half of homeowners with a mortgage feel constrained by high mortgage rates, especially those considering selling for over a year. Expectations about future interest rates play a crucial role in sellers’ plans.
Among potential sellers who anticipate a rise in rates within the next year, 43% are more likely to sell, while 20% are less likely. In contrast, 69% of those who believe rates will decline express an increased likelihood of selling.
Hannah Jones, senior research analyst at Realtor.com, commented, “Many potential homebuyers feel stuck due to their current mortgage rates, compounded by a limited supply of affordable homes. First-time buyers, lacking equity from their existing homes, face challenges in navigating the affordability landscape.”
Buyers and sellers alike are sensitive to mortgage rate fluctuations. A significant portion (78%) of potential sellers predict that rates will either remain the same or increase in the next year, shaping decisions in a market characterized by high borrowing costs and a constrained housing supply.