- According to a new Zillow report, 70% of the Americans they surveyed would not change their plans to buy a home, even if mortgage interest rates rise to 4.5%. The survey of those searching for a home or planning to buy a home within the next year comes in advance of what many anticipate to be the first Federal Reserve short-term interest rate hike in nine years.
- But Zillow also found that 45% of those surveyed would reconsider the size of the home they will purchase if such a rate increase occurs, possibly opting for a less expensive one.
- Zillow noted that in 19% of the country’s top 500 metros, an increase to 4.5% would add less than $25 per month to a mortgage payment.
Many economists, Zillow reported, expect rates to rise to that 4.5% rate by the middle of 2016, but they also said the initial impact on affordability will be minimal. According to Zillow, buying a home will continue to be more affordable than it has in the past, as long as homebuyers stay out of the most expensive markets like San Francisco and San Jose, CA.
"If the Fed does decide to raise rates this week, as we expect them to, there is no need for future homebuyers to feel that they've missed the ideal window of time to purchase a home," Erin Lantz, vice president of mortgages for Zillow Group, said in a release. "It's important to remember that while a hike would result in higher rates than we have been accustomed, they are still historically low."
The Zillow survey also determined that homebuyers, including millennials, aren’t that concerned about rising interest rates. However, 29% of them were concerned about finding an affordable home in a low-inventory environment and saving for down payment (19%). Only 14% cited rising mortgage rates as a top concern.
A recent Trulia report affirmed Zillow’s findings, as it concluded that an increase in Fed interest rates is not at the top of renters’ concerns about buying a home. Renters reported that saving for a down payment is their biggest concern, followed by credit history, qualifying for a mortgage and rising home prices. Trulia also agreed that increased mortgage rates would not outweigh the advantages of buying in most markets.