More than two-thirds of potential homebuyers may be sidelined if the Federal Reserve continues to hike interest rates and a lack of homes on the market push prices higher.
78%
That’s the percent of home shoppers surveyed who report they’ll be priced out of the market if mortgage rates and prices continue to rise.
That’s according to a new survey from Realtor.com released Wednesday. Inflation and rising interest rates are the top worries for would-be homebuyers, with nearly half citing it as a reason they’re second-guessing buying a house. Rising home prices and a potential recession are lesser considerations, but still impact roughly two out of every five shoppers, the survey showed.
The home buying market has been challenging as the Federal Reserve’s campaign of anti-inflation rate hikes has pushed mortgage interest rates higher over the last year. While the Federal Reserve is intended to rebalance an overheated home market, it has made it difficult for those looking to get into the market.
Mortgage payments have risen to decades-high levels and are more than 70% higher than pre-pandemic levels. The 14 million homeowners who bought or refinanced during the historically low rates of the pandemic are reluctant to sell their homes, leaving home shoppers with fewer for sale options.
But a change in interest rates could change the face of the home market, according to the Realtor.com survey. Those who said they may not be able to buy a home this year because of financial conditions said they are waiting for interest rates to lower so they can jump back into the market.
The largest share of those surveyed said they would jump back into home shopping if interest rates were in the 3.0%-3.25% range. That’s more than half of the current average interest rate on a 30-year fixed-rate mortgage which sits at 6.71%, according to Freddie Mac.