Are Potential Homebuyers Waiting For Rates to Drop?
By: Keith Wagstaff · June 18, 2024 · Reading Time: 2 minutes
Hitting Pause on Homeownership
Last week, the Federal Reserve, still concerned that inflation hasn’t come down enough yet, decided to keep interest rates unchanged — and elevated. But because higher rates may mean higher mortgage rates, some potential homebuyers are hesitant.
Nearly three fourths of prospective buyers(71%) said they’re waiting for rates to go down before entering the housing market, according to a recent poll by BMO . That’s up significantly from 64% during the same time last year.
Housing Shortage in America
Elevated interest rates aren’t the only piece of the housing market puzzle. There is also a shortage of homes. This housing shortage has been around since before Covid struck. But the pandemic’s supply chain issues, worker shortages, and rising material costs exacerbated the problem. As a result, there were about the same number of homes sold in April 2024 as in April 1978, despite the U.S. population growing by 118 million in the meantime, according to Fast Company using data from the National Association of Realtors.
Prospective homebuyers don’t have a lot of good options. There aren’t enough new houses and existing homeowners don’t want to sell and expose themselves to getting a new mortgage at higher rates. That has made buying and renting homes unaffordable for many Americans.
Reaching for the American Dream
Around two-thirds of U.S. consumers (67%) view buying a home as an essential part of the American dream. It’s also seen as a key ingredient to building generational wealth.
So what are consumers to do? When it comes to buying a home, there are plenty of factors outside of your control. Interest rates are just one piece of a much larger puzzle that prospective homebuyers have to consider in the process. Case in point, data shows us that the current interest rate environment hasn’t even brought mortgage refinancing activity to a halt.
Whether homeownership is the right next step may depend on financial readiness, the need to move, and finding the right asset.
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