Much has been written about how rising mortgage rates will impact the housing market, but now we have a glimpse at how they’re affection consumers.
The dramatic rise in mortgage rates has been the major story in housing this summer, and scores of media outlets – us included! – have devoted considerable coverage to how the rise in rates could negatively impact the housing recovery.
Such analyses, though, have been broad and analytical, and the key component in all this – the consumer – has been largely absent. Thankfully, the latest Real-Time Market Sentiment report from Redfin, which polled more than 1,700 consumers in 2013’s third quarter, has shed considerable light on that topic, and we decided to highlight the five main ways that consumers have been impacted by the rising mortgage rates.
1. Buying the Home They Really Want – We all have that dream house that we desire, and Redfin’s research suggests that because of rising rates, prospective homebuyers have had to compromise on what they want. Fifty-six percent of survey respondents said their ability to buy their preferred home was somewhat affected by the higher rates, and 7 percent said they were extremely affected.
2. The Pace of the Search – A majority of homebuyers also had to change the pace of their home search. Though 45 percent surveyed said they hadn’t changed their pace, 20 percent admitted to slowing their pace, while 33 percent stated they increased their pace.
3. Rates No Longer an Incentive – As we’ve written before, mortgage rates are still, relatively speaking, at historic lows, but with how quickly they’ve increased (they’re up more than a percentage point from last year), they are no longer the chief pull for homebuyers. Among those surveyed by Redfin, 37 percent said they were planning to buy because of low mortgage rates, down from 64 percent of those surveyed a year ago.
4. Rising Rates Now a Concern – The rising mortgage rates have also rocketed up amongst the public’s concerns. This was the first quarter in which Redfin asked consumers about rising rates, but 53 percent of those surveyed said they were concerned about rates; in fact, only low inventory, at 58 percent, elicited more concern among consumers.
5. It’s Not a Good Time – All throughout 2012, consumer after consumer told Redfin that it was a great time to buy a house, but the rising mortgage rates have obliterated that sentiment. Just 24 percent surveyed said now is a good time to buy, down from 46 percent a year ago; similarly, the percentage reporting that now is a bad time has doubled from 7 percent to 14 percent, though to be fair, that is down from 18 percent in 2013’s second quarter.