They may slow down their search for a new home or look for smaller homes, but a very few buyers looking at purchasing a home in 2018 will halt their plans if mortgage rates go beyond 5 percent, according to a study by online brokerage firm Redfin.
The study, which was conducted in late 2017 targeted 14 major metro areas across the U.S. and compared the answers of the respondents to a similar study conducted by Redfin in May 2017.
According to the findings, only 6 percent of the people surveyed said that they would halt all plans of buying a home if the mortgage rates touched 5 percent or more during the year, showing a modest one-point increase from the earlier survey. In contrast, 27 percent of the respondents said that an increase in interest rates would slow down their home search, down two points from the last survey.
The study indicated that 21 percent of the respondents would consider buying a home that was smaller or in another area if the interest rates increased, showing a three-point increase over a similar response in the earlier study. Interestingly, consistent with the number in the last study, 25 percent of the respondents said that an increase in mortgage rates would not impact their plans to buy a home.
After remaining under 4 percent for most of 2017, 30-year fixed mortgage rates increased above 4 percent in January and were at 4.32 percent in the first week of February. A robust economy, increase in jobs and a generally sound housing market has economists predicting a hike in Fed rates over the next few months, which would continue the upward trend for mortgage rates.
The study also gauged buyer response to the tax bill and how it would impact the economy. High taxes were the most cited response with 38 percent citing this reason among their top three concerns. Affordable housing came a close second with 33 percent respondents citing it as a concern, followed by 28 percent respondents citing the income gap between the rich and the poor as a concern after the tax bill.
When asked if they expected home prices in their areas to rise, a majority of the respondents replied in the affirmative. The study indicated that only 6 percent said that they expected a decline in price. More than half (52 percent) respondents said that they expected to home prices to rise slightly while 25 percent expected a significant rise in prices.