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At one point this month, mortgage rates fell below 6.5% Flag – Significant decline from recent peak 7.5% April.
This is not enough.
A July survey of 3,000 working U.S. adults by Inman Intel and Dig Insights showed consumers said they would need a significant drop in interest rates to be willing to buy a home.
Even as first-time buyers rejoin, they may face the same problem that plagued the housing market during the home-buying frenzy in the early days of the pandemic: There will be little new inventory to replace the homes that were snapped up.
In this report, Intel analyzed responses to the survey, which included more than 2,000 adults from across the country who said they were less likely to buy a home next year.
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Among other things, Intel asked them how low interest rates would have to drop before they could seriously reconsider — trying to find a so-called “golden rate” that would spur new activity in home sales.
- Inman-Dig Insights July consumer survey results indicate that if interest rates fall more recently, 7% grade down to 5.5%which can provide a meaningful boost to home sales.
- if interest rates fall As low as 5.0%the dam could burst, allowing more once-reluctant homebuyers to enter the market.
But the emerging picture also hides complex layers beneath the surface.
The rate target that emerged was not a clear number, but rather distinct goals for renters and homeowners. Combined with the latest interest rate forecasts, these competing dynamics could determine the state of the housing market not just for months, but for years.
Read Intel’s findings in the full report.
overall view
High mortgage rates remain a serious barrier to consumers entering the housing market.
First, the top-level findings:
- Among office workers who say they are “unlikely” to buy a home in the next 12 months, one tenth Say they will seriously consider changing their minds if mortgage rates hit rock bottom 5.5%.
- But that sharing double to one fifth In case of falling interest rates 5.0%.
While mortgage rates can fluctuate, forecasts suggest it could be years before rates reach such low levels.
- For example, the Mortgage Bankers Association, project Interest rates are expected to reach 5.9% only until the fourth quarter of 2025, and will likely remain in that range next year as well.
These results should be taken with a grain of salt.
On the one hand, all of the so-called “unlikely buyers” Intel surveyed admitted by their own admission that they are not currently in the market to buy a home. This means that some of their answers are just assumptions, rather than the result of research and kitchen table math.
After sitting down to discuss budgets and looking at home prices and monthly payments, some respondents may give different answers than in the survey.
Still, there are some clear consumer attitudes emerging from the survey data – with implications for the impact a low interest rate environment is likely to have on transaction volumes and buyer-seller dynamics in the coming years.
Back to the future?
Intel’s consumer survey results also shed light on a potential roadmap for future dynamics between buyers and sellers as interest rates continue to fall.
Unsurprisingly, the survey found that renters are more sensitive to small swings in mortgage rates. Current homeowners, on the other hand, would need to see larger declines to push them off the market.
Intel sought to quantify how big the gap is and where the two groups might eventually converge.
- If mortgage rates fall further to 6.0% — nearly 2 points below the October high — which would convince almost 9% Renters unwilling to buy homes are changing course and considering entering the residential market.
- Less than half of reluctant buyers who already own a home react the same way. only 4% Given the same scenario, people in this group would show interest in the real estate market 6.0% rate assumption.
This dynamic is not difficult to explain. The so-called “interest rate lock-in” effect has been widely discussed in the industry. In-depth research It used to be from Intel.
The vast majority of homeowners fall into one of two categories: They either have no home debt, or their current home loan interest rate is much lower than what they would soon find on the market.
Given enough time, customer churn, and rate cuts, this dynamic may eventually balance out.
But Intel’s findings suggest this scenario may prevail even if interest rates fall much more than currently expected over the next two years.
- If mortgage rates fall the following 5.0%which will convince 25% of tenants Seriously reconsider their reluctance to buy in the next 12 months.
- but Interest rates below five percent Only persuade 16% of homeowners Those unwilling to buy next year should reconsider.
Ultimately, interest rates in the 5% range—especially those below 5%—could be the perfect time to unleash a flood of new buyers and new home inventory.
But even within this range, buyer demand may exceed the supply of existing homes on the MLS. This dynamic could reinvigorate sellers’ markets in much of the country as more buyers compete for every available listing.
How can you avoid this unbalanced buyer frenzy? More new housing construction could be part of the puzzle. But if builders can’t keep up, rates may have to be reduced. 4% Intel’s findings suggest the numbers may be lower before renters and homeowners warm up to the housing market at similar rates.
This is unlikely to happen anytime soon.
About Inman-Dig Insights Consumer Surveys
The Inman-Dig Insights consumer survey was conducted July 5-7 to understand Americans’ opinions and behaviors regarding home buying.
The survey sampled 3,000 U.S. adults, ranging in age from 24 to 65, who worked full or part-time. Participants were selected and broadly representative by age, gender, and region.
Statistical rigor was maintained throughout the study, and the results should be largely representative of the attitudes held by U.S. adults working full- or part-time jobs. Inman and Dig Insights are both majority-owned by Toronto-based Beringer Capital.
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