Higher mortgage rates could change the pace of home buying
Homebuyers are most likely to slow their purchases or stay on course if mortgage rates rise above a certain benchmark, but some could act more quickly or drop out.
For now, "still-low interest rates somewhat offset high prices for some buyers," Nela Richardson, chief economist at Redfin, said in a statement.
But if mortgage rates were to rise above 5% from current levels, more than a quarter of homebuyers would slow down to see whether market conditions might become more favorable before they buy, according to a recent survey by the online real estate brokerage.
While many homebuyers would slow down, a little over one-fifth would speed up their purchases in order to buy before rates get much higher.
One-quarter of homebuyers would be unfazed by mortgage rates above 5%. One-fifth would plan to buy at the same pace, but would look to purchase a more affordable home.
Only 6% of buyers would drop out entirely in response to mortgage rates above 5%. These homebuyers could be more concentrated in markets like Denver, Seattle and Portland, Oregon, where affordable housing is a particular concern.
Most homebuyers (77%) are expecting home prices to keep rising, with 52% preparing for slight increases and 25% anticipating significant growth. Only 1% of homebuyers expect a significant drop in prices, while 5% anticipate lesser declines. The rest of the respondents expect home prices to level out.
Redfin's survey, conducted in November and December 2017, reflects the opinions of more than 4,000 consumers who sold or bought homes in the past year.