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A majority of people still believe in the American dream of owning a home, a new survey shows, as long as mortgage rates fall enough to make the math work.
With mortgage rates back over 7%, home-buying demand fell in the latest week, as buyers found it increasingly difficult to afford to purchase a home. Home prices also hit a record high, as buyers nationwide faced low inventory of homes for sale, driven by a lack of interest among existing homeowners to sell and give up their ultra-low mortgage rates.
But that doesn’t mean that aspiring homeowners are giving up on the American dream of owning property, Realtor.com said in a survey on Wednesday.
The company found that if rates fall below 7%, 18% of respondents said they would buy a home in the next 12 months. The 30-year rate had been below 7% since mid-December, according to Freddie Mac, until the market pushed it up past 7% on the back of expectations that the Federal Reserve was not going to cut interest rates in the near term due to stronger-than-expected economic data.
Each drop in rates, no matter how small, makes a difference, Realtor.com noted: For every half-percent drop in the mortgage rate, the monthly payment for the typical home falls by $120, which translates to a buyer saving $43,000 over the life of the 30-year mortgage.
If rates fall below 6%, 40% of respondents said they would buy a home in the coming year. Most economists expect the 30-year to finish the year in the 6% range.
If rates fall below 5%, a majority of respondents, 72%, said they would buy a home in the next 12 months. One expert also noted that if rates were to fall to 5%, that would “unfreeze” the housing market and encourage more homeowners to sell.
Further drops only encouraged more respondents to consider buying: A fall in the 30-year rate to below 4% would push 90% of the respondents to buy the home.
To be clear, 88.5% of homeowners in the U.S. have a mortgage rate below 6%, according to analysis by real-estate brokerage Redfin. And 59.4% — six in 10 homeowners — have a rate below 4%.
On the other hand, younger generations were a little more flexible on when they’d buy: 47% of millennials and 37% of Gen Z respondents said they would still buy a home if rates went over 8%, the Realtor.com survey said.
In fact, 55% of millennials and 40% of Gen Z said they believe now is a good time to buy a home, unlike 32% of their Gen X and 17% of their Boomer counterparts.
Millennials are also the most optimistic about being able to afford to buy a home in the near term, the survey said.
(Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
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