By Beth McGuire
Optimism toward the economy and real estate market is growing across all generations of current and prospective homeowners, but rising interest rates continue to be a concern among prospective homeowners, especially millennials, according to Berkshire Hathaway HomeServices’ latest Homeowner Sentiment Survey.
Overall, 62 percent of prospective homeowners and 61 percent of current homeowners say they are satisfied with the economy, with respondents from both groups overwhelmingly reporting that the general economic outlook is a critical factor impacting their real estate decisions.
When looking at views toward the real estate market, 68 percent of prospective homeowners and 70 percent of current homeowners hold a favorable view, an increase of five percentage points and four points, respectively, from the last wave of the survey. Nearly half of current homeowners cited lower interest rates as the top reason for their favorability toward the market; 43 percent of this group also pointed to the increased value of real estate as a factor driving favorability.
Respondents are also encouraged by accelerating home construction, with three out of four citing a rise in available homes created by new construction as a factor contributing to market momentum. Additionally, 75 percent of current and 83 percent of prospective homeowners cited increased construction in urban centers, offering homeownership options close to places of employment, as a top factor.
“Optimism in the real estate market and economy are at levels we have not seen since we first began fielding this survey in 2015,” says Gino Blefari, president and CEO of Berkshire Hathaway HomeServices. “Mortgage rates remain near historic lows even with recent upticks, and we’re seeing rising wages, job growth and construction rates, which continue to make homeownership a compelling and realistic investment for many Americans.”
Interest Rates Remain Top Concern; Housing Inventory Still Tight
Optimism notwithstanding, uncertainties related to rising interest rates persist, especially among millennials (defined in the survey as people ages 18-34). A full 68 percent of prospective millennial homeowners say they feel a sense of urgency to buy a home as interest rates may continue rising, and one in five reported a desire to buy a home before mortgage rates increase. Moreover, 55 percent of this group also reported “feeling discouraged” about buying a home due to the prospects of rising rates.
“The sense of urgency expressed by millennials shows they understand the advantages of locking in a low mortgage rate now,” Blefari says. “However, we also recognize rising interest rates can make the home-buying process feel challenging. It’s important to remember that interest rates and mortgage rates remain low by historical standards, and with guidance from a skilled real estate professional, prospective buyers can be empowered to find a home that meets their needs and financial objectives.”
A tight supply of available homes in many markets—particularly at lower and entry-level price points—presents another challenge for buyers. Builders this year are responding with more focus on lower-priced homes, according to builder trade groups, which may serve as an important nudge to hesitant millennials. In the survey, 70 percent of prospective homeowners said they are …read more
From:: Finance and Economy