Sky high mortgage rates might be scaring off fewer potential homebuyers than usual in recent months, according to a new report from Bank of America.
The bank, whose products include home loans, surveyed 500 homeowners and 500 renters and found that fewer of them (62%) are willing to hold off purchasing a home until mortgage rates and prices fall than there were just six months ago (85%).
The survey also found generational differences among prospective buyers as far as specific home features that they are willing to sacrifice to raise the chances of finding a place. Baby boomers are more likely than younger generations to give up space, for example, and they are less likely to compromise on location.
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The findings come as existing home sales are at their lowest level since 2010, and while availability is better in the new-home market, it may not last, as Kiplinger recently reported.
In a video accompanying the Bank of America study, Matt Vernon, head of consumer lending, said that if buying a home is your goal and within your budget, "the best time to buy is when you’re ready financially and you can find a home that fits your needs.”
As for what would motivate homeowners to sell, the survey found that 50% of current owners would be willing if their “dream home” became available. Some 54% said they would buy if they found a place in a more affordable area, regardless of whether rates moved higher.
According to the survey, other factors that would influence homeowners to sell include:
- A job opportunity or relocation (40%)
- Nicer neighborhood amenities (40%)
- The need for a larger home or more rooms (38%)
- A social community to be a part of (32%)
- A desire to be adventurous and move on (28%)
- A home with rental potential (21%)
Interest rates for about 80% of outstanding mortgages nationwide are below 5%, Bank of America said referring to a Zillow report. Given that, this group may be far less inclined to leave and purchase a new home, the bank said.
Another factor is that homebuyers are getting older and may be best able to swoop up the available inventory with all-cash offers, according to a November 13 Washington Post report. "A new picture is emerging of the buyers who still find a way to get a house," the article noted. "They're older, and because many of them sold a home before buying, they're also wealthier."
Meanwhile, there is contradicting advice about whether renting or buying is the right move at present, based on the landscape of the real estate market. In a December 1 New York Times piece, Mark Zandi, chief economics of Moody’s Analytics, said that this is not a good time for most people to buy a home. He pointed to high prices and mortgage rates and low inventory as reasons to choose renting right now.
“If you find the perfect place, then by all means buy it," Zandi told the NYT. "But most people are not going to find it."
Tips for finding a low mortgage rate
Although mortgage rates remain high, you can lower your rate, as Kiplinger previously reported. Actions to consider include increasing your down payment, raising your credit score and shopping around.
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