With interest rates for mortgages reaching their highest level in more than 20 years (surpassing 7%), are prospective buyers waiting for things to ease before making a purchase? Here are three key insights from the CivicScience InsightStore. For an in-depth look at how consumers are responding to interest rates and changing economic conditions, get in touch.
Prospective homebuyers say high interest rates are the leading reason keeping them from purchasing a home.
Currently, 3-in-4 U.S. adults in the homebuying market say they are being held back from the purchase of a new home – and nearly one-third of prospective buyers say high interest rates are the primary reason. As interest rates skyrocketed over the last year, they’ve also quickly become the main barrier to purchasing a home, climbing 220% from May 2022 (when the benchmark for a 30-year fixed mortgage had breached 5%).
Other barriers of entry have declined – high home prices topped the list by spring of last year, but declined significantly by year’s end and currently sit at 26%. Likewise, prospective buyers are half as likely today to say that the availability of homes that fit their budget is the main reason stalling purchasing.
Repeat homebuyers and younger adults are more likely to be dissuaded by high interest rates.
Additional data show that adults under age 55 are the most likely to cite high interest rates as the main barrier to a new home, outweighing the Gen Pop. Young Millennials and Gen Z buyers are also hindered nearly as equally by home prices.
Current interest rates appear to be more of an issue for homeowners looking to purchase a new home than for first-time buyers, who are also stalled significantly by home prices.
High interest rates are a major barrier to consumers looking to buy property in the next 12 months.
Current quarterly averages show the majority of prospective buyers (51%) plan to purchase their next property in three or more years. More than one-quarter are planning to buy in the next 12 months – with 13% aiming for the next six months. These numbers have remained relatively steady since Q3 of 2021, which could suggest that homebuyers are remaining hopeful that interest rates and home prices will fall and they can move forward.
However, recent CivicScience data find that confidence in buying a new home has declined in the last two weeks, continuing its downward slide that began in mid-July. Likewise, week-over-week tracking shows a decrease over the month of August in the percentage of people who plan to purchase a home in the next 7-12 months and an increase in those planning to wait 1-2 years. As of now, the fluctuation in intent looks on par with that seen throughout 2022 and 2023, but CivicScience will be closely monitoring whether or not this trend continues to grow.
A deeper look at how interest rates factor into homebuying plans offers further insight. Indeed, data show that interest rates are a major barrier for consumers looking to buy property in the next 7-12 months (at 49%). A high percentage (36%) of those who want to buy in the next six months also cite interest rates as the top issue stalling them; however, home availability is also a problem for 22% of these buyers.
On the other hand, consumers planning to wait a year or more to make a purchase are more likely to be waiting for the price of homes to drop, as well as interest rates.
High interest rates are also likely having a similar impact on car loans and the auto market, as indicated by past data. Follow us to gain continued coverage of how consumers are responding to changes across markets – or schedule a meeting to learn how you can get ahead of the curve.