Rising interest rates were a concern for current and prospective homeowners, according Berkshire Hathaway HomeServices’ latest Homeowner Sentiment Survey, but consumers are optimistic about the real estate market.
Overall, 66 percent of current homeowners and 63 percent of prospective homeowners view the U.S. real estate market favorably – a sentiment that has remained steady throughout 2016. Millennials were the most optimistic generation, with 74 percent reporting a favorable view — a 15-percentage point jump since the same time last year. Two-thirds of Gen-Xers also expressed a favorable view – an 8 percent increase from last year.
“There seems to be a good deal of optimism in our local market” said Berkshire Hathaway Homes Services GalloRealty Vice President Andrew Ratner. “Home prices are starting to show an increase over the last couple of years, and new-home building is on the rise. We still see a lot of interest in people moving to our resort area.”
While respondents showed overall confidence in the market compared with last year, they expressed greater concern about how an increase in the Fed’s benchmark interest rate may affect their ability to buy a home, with 76 percent of current homeowners and 79 percent of prospective homeowners citing interest hikes as the most challenging issue in the real estate market.
About 44 percent of current homeowners and 70 percent of prospective buyers said they would feel anxious if mortgage rates were to go up.
“People feel good about real estate because housing is doing well in many markets across America,” said Gino Blefari, CEO of Berkshire Hathaway HomeServices. “Although the idea of a rate hike can grab headlines and initially create some unease, it’s important to remember rate increases are often the mark of an improving, healthy U.S. economy. That is the case today.”
“Mortgage rates remain near historic lows, although it may not seem that way to recent, first-time buyers and those considering a home purchase,” said Stephen Phillips, president of Berkshire Hathaway HomeServices. “Mortgage rates ticked up following the presidential election, and we may see rates rise a little more in response to anticipated Fed action. Still, I expect mortgage rates to remain low for the foreseeable future.”
A conforming, 30-year fixed-rate mortgage carried a rate of 4.125 percent in early December, up from 3.75 percent during the same period a year ago. Phillips believes conforming rates will remain below 5 percent for the next two to three years. “I anticipate moderate, steady growth for the U.S. over the next few years as baby boomers move into new phases of their lives and millennials come into their own as consumers. All things considered, this is a formula for continued lower mortgage rates.”
In the survey, six in 10 millennials showed interest in purchasing a starter home, but others said they will rent until they can buy their dream homes. Of those who will wait, half said they only want to go through the home-buying process ones and 37 percent said they don’t want the hassles of renovation.
“Starter homes can provide first-time buyers with independence and an attainable investment,” said Blefari. “The process of buying one – while never easy – may not be as difficult as it’s perceived it to be. Of course, a trusted real estate agent will be an ally to help any new buyer get a foot in the door on their way toward accomplishing longer-term real estate goals.”
When it comes to emerging technologies in real estate, half the current homeowners and 49 percent of prospective homeowners said they were most excited about virtual reality tours as a home-buying tool. About one-quarter of prospective homeowners labeled mortgage rate calculators as “confusing.”
About 85 percent of current homeowners and 83 percent of prospective homeowners said real estate professionals are essential to the home-buying process.
