Compared to Last Year, Homebuyers Are More Inclined to Buy Now
When asked how their perspective has changed in the past year, just over 43 percent of homebuyers said they are “more inclined to buy now,” according to a recent Redfin survey of 1,002 homebuyers. This marks a 10.1 percentage-point increase from last year at this time.
Buyers this year were also slightly more likely to say that there was increased urgency before prices or rates rose.
Redfin real estate agents across the country are telling us they’re seeing unusually strong activity, while the Redfin Housing Demand Index, which is based on the number of customers requesting home tours and writing offers, is hitting record highs.
“It’s extremely busy, for two reasons,” said Redfin real estate agent Jenn Kim in Chicago, “First, we weren’t seeing much buyer activity in the fall, partially because of a normal seasonal decline, and partially because of the uncertainty of the election. And now all those buyers are in the market. But we’re also seeing historically low inventory; there aren’t enough people putting their homes up for sale. So you have extra buyers and far fewer sellers than in a balanced market. Anything priced well is finding a buyer almost instantly. I recently relisted several properties that I initially listed in the fall. In the new year, there was far more interest and they all got multiple offers.”
Homebuyers Believe Mortgage Rates Will Rise Soon
Buyers are increasingly likely to believe mortgage rates will rise substantially in the next six months, after an eight-tenths percentage-point jump at the tail-end of 2016. Just over 21 percent of buyers believed rates would increase by one point or more; last year at this time, only 9.8 percent of buyers had a similar concern.
While Redfin forecasts mortgage rates in 2017 will average no higher than 4.3 percent, only a very modest increase from the current rate of 4.10 percent, homebuyers do not feel the same.
“Mortgage rates have moderated a bit since their post-election upwards bump,” said Redfin chief economist Nela Richardson. “Rates are no longer at their historical lows but they are far from the levels that would scare off buyers. In fact we are seeing the opposite. The specter of a rate increase is stoking demand from buyers who want to purchase before rates rise again. We expect mortgage rates to stay in an affordable range through 2017, due to steady global demand for US bonds that push down borrowing costs for long-term loans like mortgages.”
Mortgage Rates are Now a More Frequent, but Still Somewhat Rare, Motivator for Buyers
When asked what most influenced their decision to buy, 6.0 percent of buyers said it was “concern that mortgage rates will rise soon,” compared to only 3.7 percent the previous year.
While this is a substantial increase, percentage-wise, mortgage rates are still low in terms of being most influential. A life event, such as marriage or the birth of a child, was marked as most influential by 26.6% of respondents, while high rent came in a close second at 24.8 percent.
In fact, mortgage rates were the fifth-most cited reason for buying, just behind relocation for work and just ahead of those who cited looking for a better school district or that they had received an increase in pay.
About the Survey
This Redfin survey was conducted between February 12 and 16 and includes responses from 1,002 users of Redfin.com in 38 states and Washington, D.C, all of whom confirmed that they had recently or were planning to buy a home.
Specifically, only responses were considered from respondents who said one of the following when asked “Are you planning to buy a home?”: “Yes, I am under contract,” “Yes, in less than 3 months,” “Yes, in the next 3-6 months,” or “Yes, in the next 7-12 months.”
Posted by: Helen Ford, PMP, Realtor, GRI at 9:00 am