At its latest meeting earlier in May, the Federal Reserve left interest rates unchanged, citing overall economic uncertainty due to factors such as tariffs. The most recent reports show consumer confidence in the economy improving. However, there are still some indications that prospective homebuyers remain largely cautious.
According to a new Realtor.com® consumer survey, 69% of Americans overall do not plan to engage in a real estate transaction within the next six months, and 63% say they are waiting for mortgage rates to drop below 5% before they would consider buying. Thirty-seven percent of all respondents also said that current mortgage rates have deterred them from buying.
At the same time, though, 23% of millennial respondents said they plan to buy a home in the next six months—an increase from 15% of millennials who said back in September 2024 that they planned to do so. This stands as an outlier, and shows that prospective buyers are not a monolith.
“Even though we found a change in millennial homebuying intent, the influence of mortgage rates cannot be overstated, with the vast majority of Americans, including millennials, prioritizing lower rates before committing to a purchase,” said Laura Eddy, vice president of research and insights at Realtor.com, in a press release. “The lock-in effect is still very much in effect.”
The “lock-in effect” refers to how homeowners who bought when mortgage rates were lower don’t want to buy or sell now when rates are higher. An earlier survey of sellers from Realtor.com in April found that 61% of potential sellers have been thinking about selling their home for more than one year—but of those sellers, 55% of them feel “locked in.”
Per Realtor.com’s recent findings, Gen Z (55%) and millennials (47%) were the generations most inclined to put off purchasing a home due to mortgage rates. Baby boomers were the ones least likely to put off buying due to mortgage rates (only 18% of baby boomer respondents said they had done so).
“Mortgage rates on top of an insufficient supply of budget-friendly homes complicates the affordability picture for many homeowners, especially first-time homebuyers who do not have equity from their existing home to help offset mortgage rates,” said Hannah Jones, senior research analyst at Realtor.com, in the press release.
“However, we expect that this lock-in effect will ease as more homeowners grow tired of waiting for significant rate changes and as life factors such as jobs, kids and retirements drive more to make a home purchase,” she added.
According to Realtor.com’s April seller survey, 78% of prospective sellers expect interest rates will either stay the same or increase over the next 12 months. Of these prospective sellers, 43% say this expectation makes them more likely to sell, while 20% say it makes them less likely.
Sixty-nine percent of the prospective sellers who said interest rates will decrease also say this makes them more likely to sell. According to Realtor.com, “(t)his suggests that potential sellers are motivated by interest rate changes and interest rates impact potential sellers’ likelihood to list.”
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