The dream of homeownership still feels out of reach for many, as high prices and mortgage rates keep potential buyers and sellers on the sidelines.
Home sales nationwide have slowed to their lowest pace in 16 years as the average 30-year fixed mortgage rate hovers close to 7%.
If mortgage rates were to drop to 6%, a new National Association of Realtors survey finds an additional 5.5 million households would be able to afford a home, including 1.6 million renters.
Rates could dip to that projected homebuying sweet spot of 6% by 2026, NAR forecasters said in the report.
Mortgage rates haven’t been below 6% in nearly three years. That’s contributing to what Bankrate housing market analyst Jeff Ostrowski calls the “lock-in” effect, as many Americans who bought or refinanced at historically low rates during the pandemic are reluctant to buy or sell.
“Everyone thinks of 3% mortgage rates as the ‘good old days,’ but the reason that mortgage rates were so low is because something had gone horribly wrong,” he said. “Now the economy is doing pretty well, and so mortgage rates are just kind of reflective of where the economy is.”
A recent Bankrate survey found that about 40% of homeowners said mortgage rates would need to drop to 6% or below for them to feel comfortable buying this year, while more than half said there is no mortgage rate at which they would be comfortable selling their home and buying another this year.
Ostrowski said his advice is always to buy when you can afford it. If you’ve built up savings, have manageable debt, and plan to stay put for several years, it could be the right time for you, he said.
Waiting, he warns, isn’t always worth it.
“If rates were to plunge by a point or two, that’s going to create an influx of buyers, and that’s going to push prices up, so it’s going to be kind of a double-edged sword,” Ostrowski said. “One thing that I would say, in most of the country it’s no longer that super intense seller’s market, so buyers at least have a little more time.”
No matter how high or low rates are, Ostrowski recommends always weighing your options before deciding on a lender and comparing at least three mortgage lenders and loan offers. There’s enough variation in rates and fees that you could save significantly over the life of a loan by shopping around.
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