Mortgage rates have reached their lowest level in over a year, dropping to 6.2% for the week ending September 12. These rates could potentially decrease further if the Federal Reserve decides to cut rates at its upcoming meeting on September 18.
A recent Realtor.com® poll of 2,201 individuals conducted in early September indicates that these rate drops may not be sufficient to entice more homebuyers into the market. The survey revealed that over one-third (38%) of Americans have postponed purchasing a home due to high mortgage rates. The recent decline from 6.35% to 6.20% for a 30-year fixed mortgage is not enough to convince them to take out a loan.
Only 6% of Americans said they would consider buying a home within the next six months if mortgage rates decreased by between 0.25 and 0.75 percentage points. In contrast, 28% stated that current mortgage rates would need to drop by two whole percentage points or more for them to consider buying within the same timeframe.
However, experts suggest brighter conditions are on the horizon.
Dan Richards, president of Flyhomes Mortgage in Seattle, remarked on historical trends: “Historically, demand picks up in a declining rate environment when the percentage drop is around 2% from the peak.” He expects home sales among millennial buyers to increase significantly once rates stabilize between 5% and 6%.
The impact of high mortgage rates has been particularly severe on Gen Z and millennial buyers, with nearly half (47%) delaying their purchase plans due to these costs.
Amalia Graham, marketing coordinator for Marketplace Homes in Detroit, shared insights about her generation’s outlook: “Although I was still extremely too young to buy a house [during the recession], my friends and I joke that maybe we should’ve been focusing on buying houses when prices were low rather than learning how to read and write.”
Matt Schwartz, co-founder of The VA Loan Network in Southlake, TX, highlighted how rising home prices and higher interest rates have deterred younger buyers: “They’re more cautious… it’s making them wait.”
Shmuel Shayowitz, president and chief lending officer at Approved Funding in River Edge, NJ emphasized psychological factors affecting young buyers: “Hearing that rates are higher is giving many pause… but those who are doing their due diligence are making appropriate decisions.”
Experts also caution potential buyers against waiting too long due to possible price increases following rate cuts. Ralph DiBugnara, president of Home Qualified in New York City warned: “Taking a higher interest rate now… is still smarter… You can always refinance… but you can’t refinance to a lower home price.”
Despite some hesitancy among first-time buyers, Shayowitz noted positive signs: “Buyers are starting to come out more consistently… we are seeing a significant uptick in bidding wars and above-ask offers.”
For those uncertain about entering the housing market now, consulting professionals such as real estate agents or mortgage lenders could provide valuable guidance through calculations like ‘rent versus buy’ analysis and ‘cost of waiting’ projections.
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