With mortgage rates sitting over 7%, it is fairly clear many Americans will opt not to move anytime soon. The bigger question that results is at what rate will most Americans consider moving or refinancing. The question was answered by a survey from John Burns Research and Consulting, which polled citizens and found that 71% of homeowners will not accept a rate higher than 5.5% if they choose to move. In January 2021, the average 30-year fixed-rate mortgage hit a low of just below 3%, creating a favorable environment for home buyers. This influx of purchases created a golden handcuff effect, where Americans are locked in on historically low mortgages and are simply discouraged from purchasing a new home. Another survey from Realtor.com found that 82% of people shopping for homes feel “locked in” by their current, lower mortgages.
Currently, the average 30-year fixed rate mortgage is 7.18%, a figure not seen since March 2002. Throughout the majority of the 21st century, Americans enjoyed lower interest rates and mortgages, but high inflation and the pandemic have created tighter conditions that have left millions “stuck”. Even if a home shopper decides to purchase a cheaper home, there is a high possibility their monthly payments may be higher with the larger amounts of interest from their mortgage. Although the housing market’s volatility has made it quite difficult to forecast, the Federal Reserve’s choices regarding interest rates will be a telltale sign of how mortgage rates will move.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.