40% of Hopeful Buyers Would Consider Buying if Rates Hit 6% or below and Millennials and Gen Z Are Even More Bullish
SANTA CLARA, Calif., Feb. 21, 2024 /PRNewswire/ -- Despite a challenging few years in the housing market, the American dream of owning a home is still alive. According to a recent Realtor.com® survey, a majority of Americans think the dream is still achievable, though for many prospective buyers, it hinges on an interest rate drop to less than 6%. Though the sentiment is generally shared across generations, for Millennials and Gen Z, there may be a little more flexibility, with nearly half (47%) of Millennials and 37% of Gen Z respondents stating they'd still buy a home if rates went above 8%.
"The current market is very different from where it was before the pandemic, but many Americans still have a positive outlook towards achieving the dream of buying a home," said Danielle Hale, Chief Economist, Realtor.com®. "This optimistic lens may shape the way younger shoppers in particular view mortgage rates. Although mortgage rates are up from a year ago, they have declined more than a percentage point from their recent peak. While some home shoppers and sellers are likely holding out for even lower rates, the improvement in affordability as rates fall has already ushered in an uptick in listings and contract signings."
Lower Interest Rates Are the Key for Hopeful Homebuyers
Buying a home is still desired and sought after, but many people are looking for mortgage rates to come down in order to achieve it. Four out of 10 Americans looking to buy a home in the next 12 months would consider it possible if rates drop below 6%. Specifically, 18% of hopeful homebuyers say buying is feasible if the mortgage rate drops below 7%--a threshold surpassed in late 2023; an additional 22% of shoppers say they can buy if the rate drops below 6%; 32%, would enter the market if rates drop below 5%; another 18% are looking for mortgage rates below 4% and the last 9% of survey respondents aren't sure what rate would make it possible for them.
Although rates are not anticipated to go below 6.5% according to Realtor.com's 2024 Housing Forecast, research shows that every half percent drop in the mortgage rate reduces the monthly payment for the typical home for sale by $120, a savings of $1,400 per year and $43,000 over the life of a 30-year mortgage.
Millennials and Gen Z Remain Positive
Amongst the generations, it's clear that Millennials and Gen Z have a more positive outlook on buying a home in today's market than their predecessors. Over half of Millennials (55%) and 40% of their Gen Z counterparts feel now is a good time to buy. Whereas only 32% of Gen X and a mere 17% of Boomers feel the same.
Similarly, Millennials are the most optimistic about being able to afford to buy a home in the very near term with 43% saying they expect to be able to do so within the next year, compared to roughly 20% of Gen Zers and Xers, respectively and just 13% of Boomers. While Gen Z may only make up 4% of all homebuyers, according to the National Association of Realtors, they are not only bullish now, but they are the most optimistic out of the generations for the somewhat distant future. Forty-five percent of surveyed Gen Zers think they will be able to afford a home in the next five years, compared to 32% of Millennials, 36% of Gen X and 26% of Boomers; pointing to a bright and optimistic future for the up-and-coming home owners.
"Over the last year the real estate market has made it feel less than possible for Americans to achieve the dream of owning a home," said Mickey Neuberger, CMO, Realtor.com®. "Given the reality of our current environment we are seeing an inspiring level of optimism shine through, indicating that not only is the dream alive, it's something that the American people are still working towards, and believe they can achieve."
For more details, Realtor.com® has information on the ways to make the American dream a reality from up-to-date home listings to helping consumers calculate how much house they can afford and understand the loan options available to them like assumable loans, which may provide an option for consumers looking for a lower rate.
About Realtor.com®
Realtor.com® is an open real estate marketplace built for everyone. Realtor.com® pioneered the world of digital real estate more than 25 years ago. Today, through its website and mobile apps, Realtor.com® is a trusted guide for consumers, empowering more people to find their way home by breaking down barriers, helping them make the right connections, and creating confidence through expert insights and guidance. For professionals, Realtor.com® is a trusted partner for business growth, offering consumer connections and branding solutions that help them succeed in today's on-demand world. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc. For more information, visit Realtor.com®.
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SOURCE realtor.com
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