Homeowners with a mortgage rate above 5% are nearly twice as likely to say that they plan to sell their home than those paying a rate below 5%, according to Zillow’s quarterly survey report.
Additionally, the survey found that about 80% of mortgage holders reported having a rate of less than 5%, while 90% reported having a rate of less than 6%. Almost one-third reported having a rate of less than 3%.
Mortgage rates, by first being historically low during the pandemic and then jumping into the 7% range, have incentivized homeowners to stick around instead of moving. As a result, total existing home sales slipped 3.3% in June from the prior month to a seasonally adjusted annual rate of 4.16 million.
“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.”
Nearly one-quarter of homeowners are considering selling their home in the next three years or currently have their home listed for sale (23%), per Zillow. It is significantly higher than the 15% of homeowners who said the same one year ago. In fact, the share is even greater among mortgage holders who have a mortgage rate above 5%. Nearly 40% of those homeowners say they would consider selling their home in the next three years.
Of the homeowners considering selling in the next three years, two-thirds (66%) cited a desire for an upgraded home with nicer features as the reason. Half said it was because they expect to get more money now than in the future, and 45% said a growing family would influence their decision to sell and find a new house.
All of this suggests inventory could meaningfully rise as mortgage rates tick down into the 5% range.
In the meantime, the shortage of for-sale homes is pushing up prices, adding to an already severe affordability crisis. A typical monthly mortgage payment is more than twice as much as it was in 2020 and 13% higher than a year ago.
However, demand remains strong. Buyers are persisting and getting creative to achieve homeownership. According to a recent survey from Zillow Home Loans, nearly half of them are buying points to lower their interest rate and reduce their monthly mortgage payment (45%). Mortgage points give buyers an option to pay an upfront fee to buy down the interest rate on a loan. Buyers are also forced to compromise on their initial wish, settling for smaller, more affordable homes.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : HousingWire – https://www.housingwire.com/articles/if-mortgage-rates-fall-to-5-the-housing-market-could-get-interesting/
