Possibility of panic
In the wake of the Trump administration, mortgage interest rates are at the forefront of discussion. Along with this discussion, however, seems to come an inevitable, uneasy, panicked feeling: the panic of the possibility of rising interest rates along with the possibility of another housing crisis.
Some aspects of the housing market may be less than stellar, especially considering last week when the average 30-year fixed-rate mortgage rose to 4.16 percent.
The timing of this rise is a bit coincidental given the Federal Reserve also raised the federal funds rate for the first time in a year (and only the second time this decade). Even with these two increases, however, all is not lost in the housing market, at least according to Redfin.
Interest is on the rise though, right?
You might think the increase in interest will deter potential homebuyers. While this is a valid concern, Redfin is predicting that rates will not average above 4.3 percent for the year.
For the sake of argument, though, what if they did continue to rise? Would this deter the greater majority of homebuyers? Not according to Redfin.
Their study found that even if rates were to continue to rise about 4 percent, only 2.6 of people surveyed stated the rise would cause them to cancel their home search.
What the numbers say
Another surprisingly high group (at 25.3 percent) stated that the theoretical rise in interest would have no impact on their home buying plans. Three of the other groups stated that a rise would indeed effect their home buying plans. 23.8 percent of those surveyed stated they would increase their urgency to buy a home before the rates went up any further.
Conversely, 25.8 percent stated they would slow down their search to wait and see if rates came back down again before finalizing their home purchase. Finally, 22.6 percent of the people surveyed stated their urgency wouldn’t change, but they might have to look into alternative (less expensive) areas, or buy a smaller home due to the increased payments a higher rate of interest would cause them.
Homebuyers are resilient
What does all this data mean? It shows that homebuyers are more resilient than perhaps we originally thought. Homebuyers seem to be relatively unconcerned with the possibility of the continued rise of interest rates. Perhaps some of them expected the rise, or perhaps some of them are just genuinely willing to do whatever it takes to get into a new home.
As Redfin suggests, “often homebuyers are searching for a new home because of a major life event, such as a birth, marriage, or job relocation, which can’t easily be timed to the market, but which still motivates a purchase along its own timeline.”
In essence, many homebuyers simply cannot wait for the market to change. They need a home at the time that is convenient for them, even if it means paying more.
This may not be the best news for homebuyers, but it is good news (at least somewhat) for real estate professionals. Keep in mind that homebuyers are more resilient than you think. Their desire to own a home can supersede many factors, including price. While there are a great many things still uncertain in the economy, perhaps it won’t be as cataclysmic as we initially thought.