Potential home buyers leave a property for sale during an open house in a neighborhood in Clarksburg, Maryland.
Robert Schmidt | AFP | fake images
Most potential homebuyers expect mortgage rates to continue their recent decline, and it's one of the main reasons they're waiting to make a purchase, according to the findings of a new CNBC housing market survey.
Rates have been steadily falling in recent months and are hovering around the lowest level in a year, with the average rate on the popular 30-year fixed loan now 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 drop even further.
“My biggest challenge is when buyers hear predictions of future rate reductions, which in turn causes buyers to sit on the sidelines and wait to see how low they will go instead of going out 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 throughout the United States. Responses were collected between September 22 and 30. This quarter, 54 agents shared what they see in their market.
Most agents said they believe current conditions favor buyers over sellers, but they still cited affordability as the number one reason buyers are delaying their purchases.
Despite optimism that mortgage rates will continue to fall, agents said rates remain buyers' top concern. This was followed by uncertainty in the economy and then general affordability.
However, that sentiment seems at least somewhat removed from reality: 44% of agents reported that prices are decreasing in their areas, and only 20% said they are increasing.
“Sellers are still pricing for a seller's market, and buyers are willing to wait for prices and rates to come down. It's a bit of a stalemate, and people only move if they absolutely have to,” said Katie Kosnar, an agent in North Carolina serving Raleigh and Durham. “Right-sizing used to be a determining factor, but most sellers I've met will pay a higher mortgage for a smaller home and simply aren't willing to take that step.”
As a result, buyers are turning to interest rate reductions or turning to adjustable-rate mortgages, which offer lower interest rates, to offset price pressures.
About 40% of respondents said their buyers borrow money from family or friends to pay for a home. Buyers are also making compromises on the size, location or features of the home to lower the price, agents said.
The vast majority of agents surveyed by CNBC said they expect home sales to improve slightly or stay about the same in the next quarter, and about 17% expect sales to fall. Of course, this varies by location, with some of the markets that heated up the most during the pandemic seeing the steepest declines and other more affordable markets posting bigger gains.
As for sellers, agents reported that the biggest concern among that group is how long it will take to find a buyer. Some are concerned that their home is priced too low, and sellers are also watching mortgage rates closely, agents said.
About 89% of agents who responded to the CNBC survey reported that at least one seller lowered their asking price, and nearly a third said more than half of their sellers lowered their prices.
About 40% of agents said at least one seller removed their home from the listing, hoping to get a better price later.
Home prices continued to rise annually through August, according to several other national indices, but price increases are slowing. Prices are rising most in the Northeast and Midwest and weakening most in the South and West.
The supply of homes for sale in September was higher than a year ago, as were new homes for sale after a particularly slow August, according to Zillow.
New listings typically drop from August to September, and while that was true this year (with a 2% month-over-month decline), it was a smaller drop than the average 9% monthly drop seen over the past seven years, also according to Zillow.
Inventory has made solid gains over the past year, but remains historically tight, especially for more affordable properties.
“For buyers, low inventory and mortgage rates, from an affordability standpoint, continue to be a challenge,” said Holly David, an agent in Richmond, Virginia. “For sellers who are stuck at 3% [mortgage] rate, even though they may have a desire or need for housing, they may not be willing or able to make a move.”
