The majority of prospective buyers expect mortgage rates to continue their recent decline, and that’s one of the main reasons they’re waiting to make a purchase, according to the results of a new CNBC housing market survey.
Rates have been falling gradually over the past few months and are hovering around their lowest level in a year, with the average rate on the popular 30-year fixed loan now sitting at 6.17%, according to Mortgage News Daily. But nearly three-quarters of real estate agents surveyed by CNBC said most of their buyers think rates will fall further.
“My biggest challenge is when buyers hear predictions of future rate cuts, which causes them to sit on the sidelines and wait to see how far they go instead of jumping in and buying now,” said Maureen States, a real estate agent in Pittsburgh.
The CNBC Housing Market Survey is a national survey of randomly selected real estate agents across the United States. Responses were collected between September 22 and 30. This quarter, 54 agents shared what they are seeing in their market.
Most agents said they view current conditions as favoring buyers over sellers, but they nonetheless cited affordability as the main reason buyers are delaying purchases.
Despite optimism that mortgage rates will continue to fall, agents said rates remain buyers’ main concern. This was followed by economic uncertainty, then overall affordability.
This sentiment, however, seems at least somewhat removed from reality: 44% of agents reported falling prices in their area, and only 20% reported they were rising.
“Sellers are still pricing based on a seller’s market, and buyers are willing to wait for prices and rates to come down. It’s a bit of a catch-22, and people don’t move unless they absolutely have to,” said Katie Kosnar, a North Carolina agent serving Raleigh and Durham. “Previously, the right size was a deciding factor, but most sellers I’ve met will pay a higher mortgage for a smaller home and simply won’t be willing to make that choice.”
As a result, buyers are resorting to interest rate buydowns or switching to variable rate mortgages, which offer lower interest rates, to offset pricing pressures.
About 40% of those surveyed said their buyers borrowed money from family or friends to be able to afford a home. Buyers also compromise on home size, location or features in order to lower the price, agents said.
The vast majority of agents surveyed by CNBC said they expect home sales to improve slightly or remain roughly flat over the next quarter, and about 17% of them expect sales to decline. Of course, this varies by location, with some of the markets that have warmed the most during the pandemic seeing the steepest declines, and other, more affordable markets seeing larger gains.
As for sellers, agents reported that this group’s biggest concern is how long it will take to find a buyer. Some worry their home is priced too low, and sellers are also watching mortgage rates closely, agents said.
About 89% of agents responding to CNBC’s survey said at least one seller had reduced their asking price, and nearly a third said more than half of their sellers had lowered their prices.
About 40% of agents said at least one seller had delisted their home, hoping to get a better price later.
House prices continued to rise on an annual basis through August, according to several other national indexes, but price increases are narrowing. Prices rise the most in the Northeast and Midwest and fall the most in the South and West.
The supply of homes for sale in September was higher than it was a year ago, as were new listings after a particularly slow August, according to Zillow.
New listings typically drop from August to September, and while that was true this year — with new listings down 2% month over month — it was a lower drop than the average monthly drop of 9% seen over the past seven years, also according to Zillow.
Inventories have seen strong gains over the past year, but they remain historically tight, especially for more affordable properties.
“For buyers, low inventory and mortgage rates, from an affordability standpoint, remain a challenge,” said Holly David, an agent in Richmond, Virginia. “For sellers who are stuck on a 3% rate [mortgage] even if they have a desire or need for housing, they may not be willing or able to move.