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This year began with a higher level of optimism toward the housing market, and there are indicators the end of an especially tough time for buyers is near. But it's still too early to call it a buyer's market.
Many homebuyers are still waiting for mortgage rates to come down to levels they find tolerable before making a move. What will it take to get them off the fence? According to a new survey of potential homebuyers, 5% is the "magic mortgage rate" that will spur them to purchase.
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Homebuyers waiting for lower mortgage rates
New survey data from Realtor.com shows that 1 in 5 potential homebuyers are waiting for mortgage rates to dip below 6% to be able to afford to buy a house. If rates drop even lower — below 5% — nearly one-third of potential buyers say they could afford to buy.
Unfortunately, aspiring homebuyers might be left waiting longer than they'd like for mortgage rates to drop below 6% again. Many Americans anticipated that mortgage rates would give by early 2024, because that was when the Fed was expected to announce its first interest rate cut.
But now, with the economy doing so well, the Fed has balked at the idea of cutting interest rates so soon. Some experts now predict that the first rate cut will not take place until at least late 2024. If that's the case, mortgage rates wouldn't see a significant decline until then, either.
Despite high mortgage rates and prices, many of those surveyed say they are continuing to pursue buying a home in 2024 — specifically young people. Almost half of millennials and about 4 in 10 Gen Z homebuyers say they will continue their journey to homeownership even if mortgage rates rise above 8%.
These two groups of young people are among the most confident that they will be able to afford a home in the next five years. "There are certainly more challenges [for younger buyers]; they tend to have lower incomes and lower savings," said Danielle Hale, chief economist at Realtor.com. At the same time, however, Hale adds that "with incomes now outpacing inflation, we’re looking at real increases in their purchasing power."
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FAQs
According to a new survey of potential homebuyers, 5% is the "magic mortgage rate" that will spur them to purchase. Not sure which loan type to choose? Go with a 30 Year Fixed Rate Loan, 90%+ of Americans do. You can enter the mortgage loan amount, or the total home price if you have a downpayment.
Is it bad to buy a house when interest rates are high? ›
The bottom line. Today's elevated mortgage rate environment isn't preferable for homebuyers, but it doesn't mean that you should refrain from acting, either. If you discover your dream home, can afford the interest rate, find an affordable house, or have an alternative to rent, it can be worth it for you now.
Is a 5% mortgage rate good? ›
But there is a tipping point, recent reports found: Homeowners are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to Zillow, and 71% of prospective homebuyers who plan to purchase their next home with a mortgage said they would not accept a rate above 5.5% — that is the “ ...
Why are mortgage rates soaring? ›
Those rate hikes were implemented with the goal of tempering an inflation spike. Mortgage rates moved up as the Fed bumped the target fed funds rate higher. The Fed projected rate cuts to begin in 2024. However, lingering inflation, still above 3%, has tempered rate cut expectations for now.
Is 7% a high mortgage rate? ›
Top-tier borrowers could see mortgage rates in the low-7% range, while lower-credit and non-QM borrowers could expect rates well above 8%. Of course, mortgage rates are famously volatile and it's possible a good mortgage rate next year might be substantially higher than what it is today.
What is the highest 30 year mortgage rate ever? ›
What were the highest mortgage rates in history? The highest mortgage rates in history were in the 1980s. Thirty-year fixed mortgage rates hit their peak at 18.63% in October 1981. This was likely due to high inflation following the OPEC embargo.
Is it possible to get a 4% mortgage rate? ›
Aspiring homeowners put off by current mortgage rates can still find newly built homes that come with a 4% mortgage rate, one real-estate expert says. With the 30-year mortgage averaging 7.76% as of Nov. 2, many home buyers find that borrowing costs — and high home prices — make it too expensive to purchase a home.
Will 2024 be a good year to buy a house? ›
The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have cooled a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.
How low will mortgage rates go in 2024? ›
But until the Fed sees evidence of slowing economic growth, interest rates will stay higher for longer. The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025.
Will mortgage rates ever be 3% again? ›
In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.
As of June 6, 2024, the average 30-year fixed mortgage rate is 6.85%, 20-year fixed mortgage rate is 6.59%, 15-year fixed mortgage rate is 6.04%, and 10-year fixed mortgage rate is 5.92%. Average rates for other loan types include 6.75% for an FHA 30-year fixed mortgage and 6.91% for a jumbo 30-year fixed mortgage.
Why did my mortgage go up if I have a fixed rate? ›
The benefit of a fixed-rate mortgage is that your interest rate stays consistent. But your monthly mortgage bill can still change — in fact, it generally fluctuates at least a little bit every year. Rising home values and insurance premiums have caused unusually dramatic increases for some homeowners in recent years.
Can you get 3% mortgage rate? ›
According to Goldman Sachs, 99% of borrowers have a mortgage rate lower than 6% (or the current market rate). Of those, 28% locked in rates at or below 3% and 72% locked in rates at or below 4%. So if you took on a $700,000 mortgage with a 7% rate, your total monthly payment would be $4,657.
Is 5.5 a magic number for mortgage rates? ›
A September survey by U.S. real-estate industry consultants John Burns Research & Consulting pinpointed that magic number at 5.5%. Nearly three-quarters of respondents who plan to purchase their next home with a mortgage said “they are not willing to accept” a mortgage rate above that 5.5% figure, the company reported.
What is the most current interest rate for mortgages? ›
Weekly national mortgage interest rate trends
| 30 year fixed | 7.16% |
|---|
| 15 year fixed | 6.64% |
| 10 year fixed | 6.58% |
| 5/1 ARM | 6.65% |
As of June 5, 2024, the average 30-year fixed mortgage rate is 6.92%, 20-year fixed mortgage rate is 6.65%, 15-year fixed mortgage rate is 6.11%, and 10-year fixed mortgage rate is 5.90%. Average rates for other loan types include 6.78% for an FHA 30-year fixed mortgage and 6.97% for a jumbo 30-year fixed mortgage.
