The majority of prospective homebuyers expect mortgage rates to continue falling in recent days, making it one of the main reasons they’re waiting to buy, according to results from a new CNBC housing market survey.
Interest rates have gradually fallen in recent months and are hovering near their lowest levels in a year, with the average rate on a popular 30-year fixed loan currently sitting at 6.17%, according to Mortgage News Daily. But nearly three-quarters of real estate agents surveyed by CNBC said most buyers think interest rates will fall further.
“My biggest challenge is when buyers hear predictions of future rate reductions,” said Maureen States, a real estate agent in Pittsburgh. “Instead of buying right away, buyers sit on the sidelines and wait to see how low rates go.”
The CNBC Housing Market Survey is a national survey of randomly selected real estate agents across the United States. Responses were collected from September 22nd to September 30th. This quarter, 54 agents shared what they’re seeing in the market.
Most agents said they believe the current situation favors buyers over sellers, but they still cite affordability as the top reason buyers are delaying a purchase.
Despite optimism that mortgage rates will continue to fall, agents said interest rates remain buyers’ biggest concern. This was followed by economic uncertainty, followed by overall affordability.
However, that sentiment seems to be at least somewhat disconnected from reality. 44% of agents report that prices in their territory are decreasing, while only 20% say they are increasing.
“Sellers are still pricing in a seller’s market, and buyers are going to wait for prices and interest rates to come down. It’s a bit of a stalemate, but people will only move if absolutely necessary,” said Katie Costner, a North Carolina agent serving Raleigh and Durham. “Right-sizing used to be an important factor, but most sellers I’ve met aren’t willing to take that action because they would be paying a higher mortgage for a smaller home.”
As a result, buyers are using interest rate buydowns or turning to adjustable-rate mortgages, which offer lower interest rates, to offset price pressures.
About 40% of survey respondents said buyers borrow money from family or friends to purchase a home. Brokers say buyers are also making compromises on home size, location and features to lower prices.
A majority of agents in the CNBC survey expect home sales to improve slightly or be about the same in the next quarter, with about 17% expecting sales to decline. Of course, this varies by location, with some markets that heated up the most during the pandemic seeing the sharpest declines, and other more affordable markets seeing bigger gains.
As for sellers, the agency reports that the group’s biggest concern is how long it will take to find a buyer. Brokers say some are concerned that their homes are priced too low, and sellers are also closely monitoring mortgage rates.
About 89% of agents surveyed by CNBC reported having at least one seller reduce their asking price, and nearly a third of sellers said more than half had reduced their price.
About 40% of agents said they had at least one seller delist their home in hopes of getting a better price later.
Several other national indicators show that house prices continued to rise on an annual basis through August, but the rate of increase has slowed. Prices have increased the most in the Northeast and Midwest, and fallen the most in the South and West.
According to Zillow, the supply of homes for sale increased in September compared to a year ago, as did the number of new listings after a particularly slow month in August.
The number of new listings typically declines from August to September, and this year was no different, with new listings down 2% from the previous month, which was also smaller than the average monthly drop of 9% seen over the past seven years, according to Zillow.
While inventory has steadily increased over the past year, conditions remain historically tight, especially for more affordable properties.
“For buyers, inventory and low mortgage rates continue to be a challenge from an affordability standpoint,” said Holly David, an agent in Richmond, Virginia. “Sellers locked into a 3% (mortgage) rate may not be willing or able to move, even if they want or need a home.”
