SEATTLE, Dec. 15, 2015 /PRNewswire/ -- This week the
Federal Reserve is expected to raise interest rates for the first
time in nine years, but the impact on potential home buyers'
behavior will be minimal, according to a new Zillow®
surveyi. Most people (70 percent) who say they are
currently searching for a home or plan to buy within the next year
will continue with their home buying plans even if rates rise to
4.5% -- roughly where economists expect they will be by mid-2016.
That said, while plans to purchase will remain intact, almost
half (45 percent) of current home shoppers claim they would
reconsider the type of home they are searching for, such as looking
for a smaller home or less expensive community, should this 50
basis point increase in mortgage rates occur.
The impact on home buyers from an affordability standpoint will
be also minimal, at least initially, and buying a home continues to
be more affordable than it has been in the past. In 19 percent of
the country's top 500 metros, the monthly mortgage payment on the
median home would increase by less than $25 per month as mortgage rates rise from 4
percent to 4.5 percentii. The homeowners that will be
hit the hardest by a rate increase will be those living in U.S.
metros where housing is expensive and affordability is already an
issue. In markets like San
Francisco or San Jose,
monthly mortgage payments could increase by $175 or more with a 50 basis point
jumpiii.
"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," said
Erin Lantz, vice president of
mortgages for Zillow Group. "It's important to remember that while
a hike would result in higher rates than we have been accustomed,
they are still historically low. Mortgage rates are an important
factor to consider during the home buying process, but personal
considerations about the home type and location should trump
concerns about moderate rate changes."
According to the survey, rising interest rates rank relatively
low among the top concerns of homebuyers. Respondents who are
currently in the process of searching for or buying a home claimed
they were most concerned about finding an affordable home amidst
low inventory (29 percent), followed by saving for down payment (19
percent). Rising mortgage rates ranked low among the concerns of
potential home buyers, and were cited as a top concern for only 14
percent of Americans. Millennials, or survey respondents age 25 to
34, also claimed that qualifying for a loan with their credit score
was a larger concern than rising mortgage rates.
"The larger concern for future homebuyers is the Fed's
commitment to a path of rate hikes in the months ahead," continued
Lantz. "If the Fed continues to raise rates on a monthly or even
quarterly basis, then it is more likely that we will eventually see
the end of the era of incredibly low mortgage rates and
corresponding high affordability."
Zillow
Zillow® is the leading real estate
and rental marketplace dedicated to empowering consumers with data,
inspiration and knowledge around the place they call home, and
connecting them with the best local professionals who can help.
Zillow serves the full lifecycle of owning and living in a home:
buying, selling, renting, financing, remodeling and more. In
addition to Zillow.com®, Zillow operates the most
popular suite of mobile real estate apps, with more than two dozen
apps across all major platforms. Launched in 2006, Zillow is owned
and operated by Zillow Group (NASDAQ:Z and ZG) and headquartered in
Seattle.
Zillow and Zillow.com are registered trademarks of Zillow,
Inc.
i This survey was conducted from Nov. 30, 2015 through Dec
2, 2015 of 1,010 adults by ORC International on behalf of
Zillow, Inc.
ii Effect of a 50 basis point increase in mortgage rates
on median home value in each metro, assuming 30-year fixed rate
increases from 4% to 4.5% with a 20% down payment.
iii Effect of a 50 basis point increase in mortgage
rates on median home values in San
Francisco and San Jose,
assuming 30-year fixed rate increases from 4% to 4.5% with a 20%
down payment.
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SOURCE Zillow