Last week, Realtor.com published another version of its ‘‘magic number’’ forecast. The number in question is the mortgage rate number low enough to ‘‘unfreeze’’ the real estate market.
We know that the market has been in something of a gridlock for over a year now:
- Home prices are very high and keep rising.
- Mortgage rates are high and aren’t showing much of a downward trend.
- There aren’t enough homes to go around, especially those that are remotely affordable.
Something has to give.
The consensus is that this something is mortgage rates—they’ll have to come down substantially for the housing market to get back to anything resembling normality.
What’s the Magic Number?
So, Realtor.com asks, what is the mortgage rate threshold that needs to be crossed for buyers to start buying again? Well, the answer depends on who you ask and when.
Of the 5,000 U.S. consumers surveyed, 22% would consider a home purchase if rates went below 6%. And for 18% of respondents, a rate of below 7% would be good enough.
Long-suffering millennials and Gen Z buyers are even more resigned to high rates—47% of respondents in the millennial bracket and 37% in the Gen Z bracket would still take the plunge even if rates topped 8%. Basically, buyers in these categories will buy no matter what—if they just manage to save up enough and can find a home to buy.
Asking the Right Questions
However, there is an elephant in the room with this ‘‘magic number’’ forecasting: It’s not asking the right question. And because it’s not asking the right question, it’s not precise enough in its choice of respondents.
First-time buyers, daunted and discouraged as they may be by the new reality of high home prices and high rates, will not give up on their perception of homeownership as a dream worth striving toward. But first-time buyers also hold no power in the current real estate market dynamic. The people who do…