Further increases in interest rates wouldn’t deter buyers, survey says
Anyone who has been in the market to purchase a home recently probably knows that interest rates on traditional 30-year mortgages have risen in the past year, from about 4 percent in July 2017 to 4.625-4.75 percent early this month.
Results from a survey, however, indicate that even a rate increase to 5 percent is likely to dissuade only a fraction of potential homebuyers from making a purchase. That’s of significance in the Bend real estate market to both buyers and potential sellers, as it indicates that the strong demand for homes – even in an escalating environment like ours – is likely to continue even if interest rates continue to creep upward.
A survey commissioned by Redfin, a real estate brokerage, had 1,300 respondents who planned to buy a home in the coming year. The survey included 14 metropolitan areas across the country. Of those 1,300 respondents, 5 percent said an increase of interest rates to 5 percent would prompt them to forgo their plans to purchase a home. So, 95 percent would still want to purchase, meaning the housing market would continue to have considerable pressure on the buying side.
Perhaps more important, the survey found that “24 percent of buyers said such an increase would have no impact on their search.”
In the survey of reactions to an interest rate of 5 percent, the largest segment of respondents (32 percent) said they monitor the rates and wait for a future decline.
Conversely, 19 percent of those planning to buy a home would ratchet up the pace of their search and the urgency of buying before rates rose further.
Finally, a rise to a 5 percent interest rate would prompt 21 percent of the respondents to adjust their search – looking in other areas than originally planned or looking for a smaller home. (The percentages cited don’t sum to 100 percent, presumably because of rounding.)
“Most of the pressure buyers are feeling is from competition for a very limited number of homes for sale,” Taylor Marr, senior economist at Redfin, said. “The fact that such a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent reflects their determination to be a part of the housing market.”
Although Redin’s survey didn’t include Central Oregon, the above statement applies to the Bend real estate market. A shortage of buildable land and difficulty finding laborers have contributed to a low inventory of homes, one that skews toward a seller’s market.
The results of this survey, Redfin says, are consistent with those from similar surveys it commissioned in May 2017 and November 2017. That’s further evidence that the increase in interest rates hasn’t produced evidence of a change in buyers’ plans.
Consider also that even a rise to 5 percent – by historical standards – would produce a relatively low rate, as the long-term average for a 30-year fixed mortgage is 8.1 percent.
Whether you’re a homebuyer or you’re considering selling your home, I can help. I am confident that my experience in the market, my knowledge of the industry and my ethics and values will combine for an optimal experience. Please contact me at (541) 383-1426 or visit Bend Property Search to connect with me through my website.