SEATTLE, Feb. 24, 2017 /PRNewswire/ -- The majority (53
percent) of current home shoppers consider rising interest rates to
be among the top factors impacting their ability to purchase a
home, according to a new survey from Zillow Group Mortgages[i].
Mortgage rates increased following the U.S. presidential election
and federal funds rate hike in December. With several more federal
funds rate increases expected this year, rising rates may have an
impact on home buying activity and affordability for the first time
in years.
Respondents who are currently in the process of searching for or
buying a home claim they are most concerned about finding an
affordable home amidst low inventory (65 percent), followed by
concerns over rising interest rates (53 percent). When this same
survey was conduct in 2015[ii], rising mortgage rates (50 percent)
ranked lower among top concerns for home buyers, falling behind
both finding an affordable home (73 percent) and saving for a down
payment (59 percent).
Despite rising concerns, plans to purchase won't be impacted -
at least initially. Most people (83 percent) planning to buy within
the next three years will continue with their home buying plans
even if rates increase their monthly mortgage payment by
$100. Nearly half (49 percent) of
home shoppers would move forward with a home purchase even if
rising rates were to increase their monthly payments by at least
$200.
That said, as rates rise and monthly payments for homes will
increase, buyers' budgets will be more strained. A quarter of home
shoppers claim they would reconsider the type of home they are
searching for, such as looking for a smaller home or less expensive
community, should their monthly payment increase by up to
$100 (25 percent). If monthly
payments were to increase up to $200,
another 38 percent of home shoppers would change the budget of the
home they are searching for.
"For years, falling interest rates have been a boon to the U.S.
housing market, keeping monthly mortgage payments low for
first-time and move-up buyers alike, even as home values rose,"
said Erin Lantz, vice president of
mortgages for Zillow Group. "As rates rise this year, first-time
buyers and those looking to buy in expensive markets where
affordability is already an issue will feel the pinch of higher
rates on their budget. That said, for most borrowers, there is
quite a bit of head room for rates to rise before home-buying
becomes unaffordable."
For the typical homebuyer shopping for the median U.S. home,
valued at $195,300[iii], an increase
in mortgage rates from 4 percent to 4.25 percent would increase
their monthly mortgage payment by approximately $23[iv]. Across the U.S., only 4 of the largest
35 metros would see monthly mortgage payments rise by more than
$100 should rate hit 4.5 percent. If
rates rise to 5.0 percent, 19 of the largest 35 metros would see
monthly payments on the median home rise by $100 or more[v].
The buyers that will be hit the hardest by a rate increase will
be those living in U.S. metros where housing is expensive. In
markets like San Francisco or
San Jose, monthly mortgage
payments could increase by $400 or
more if mortgage rates rise to 5.0 percent[vi].
According to the latest Zillow® Home Price Expectations Survey,
which polled 100 housing market experts, the effect of housing
affordability in the wake of rising mortgage rates is set to be the
most significant force driving the housing market this year.
IMPACT OF INTEREST RATE INCREASE ON MONTHLY PAYMENT, BY METRO
AREA
Metropolitan
Area
|
Zillow
Home
Value Index
(ZHVI)[vii]
|
Monthly
Mortgage
Payment at
4.0%[viii]
|
Monthly
Mortgage
Payment at
5.0%[ix]
|
Difference in
Monthly
Mortgage
Payment
|
United
States
|
$195,300
|
$740
|
$839
|
$99
|
New York,
NY
|
$404,800
|
$1,546
|
$1,738
|
$192
|
Los Angeles-Long
Beach-Anaheim, CA
|
$595,700
|
$2,275
|
$2,558
|
$283
|
Chicago,
IL
|
$206,000
|
$787
|
$885
|
$98
|
Dallas-Fort Worth,
TX
|
$202,000
|
$772
|
$868
|
$96
|
Philadelphia,
PA
|
$214,900
|
$821
|
$923
|
$102
|
Houston,
TX
|
$175,900
|
$672
|
$755
|
$84
|
Washington,
DC
|
$380,900
|
$1,455
|
$1,636
|
$181
|
Miami-Fort
Lauderdale, FL
|
$248,100
|
$948
|
$1,065
|
$118
|
Atlanta,
GA
|
$174,200
|
$665
|
$748
|
$83
|
Boston, MA
|
$413,900
|
$1,581
|
$1,778
|
$197
|
San Francisco,
CA
|
$833,600
|
$3,184
|
$3,580
|
$396
|
Detroit,
MI
|
$136,500
|
$521
|
$586
|
$65
|
Riverside,
CA
|
$321,200
|
$1,227
|
$1,380
|
$153
|
Phoenix,
AZ
|
$231,300
|
$883
|
$993
|
$110
|
Seattle,
WA
|
$413,900
|
$1,581
|
$1,778
|
$197
|
Minneapolis-St Paul,
MN
|
$238,000
|
$909
|
$1,022
|
$113
|
San Diego,
CA
|
$530,900
|
$2,028
|
$2,280
|
$252
|
St. Louis,
MO
|
$149,800
|
$572
|
$643
|
$71
|
Tampa, FL
|
$181,200
|
$692
|
$778
|
$86
|
Baltimore,
MD
|
$258,400
|
$987
|
$1,110
|
$123
|
Denver, CO
|
$356,900
|
$1,363
|
$1,532
|
$170
|
Pittsburgh,
PA
|
$134,300
|
$513
|
$577
|
$64
|
Portland,
OR
|
$357,000
|
$1,363
|
$1,533
|
$170
|
Charlotte,
NC
|
$169,000
|
$645
|
$726
|
$80
|
Sacramento,
CA
|
$355,000
|
$1,356
|
$1,525
|
$169
|
San Antonio,
TX
|
$157,500
|
$602
|
$676
|
$75
|
Orlando,
FL
|
$201,400
|
$769
|
$865
|
$96
|
Cincinnati,
OH
|
$149,800
|
$572
|
$643
|
$71
|
Cleveland,
OH
|
$131,700
|
$503
|
$566
|
$63
|
Kansas City,
MO
|
$153,500
|
$586
|
$659
|
$73
|
Las Vegas,
NV
|
$216,400
|
$827
|
$929
|
$103
|
Columbus,
OH
|
$161,100
|
$615
|
$692
|
$77
|
Indianapolis,
IN
|
$135,600
|
$518
|
$582
|
$64
|
San Jose,
CA
|
$970,000
|
$3,705
|
$4,166
|
$461
|
Austin, TX
|
$263,400
|
$1,006
|
$1,131
|
$125
|
About Zillow Group
Zillow Group (NASDAQ: Z and ZG) houses a portfolio of
the largest real estate and home-related brands on the Web and
mobile. The company's brands focus on all stages of the home
lifecycle: renting, buying, selling, and financing. Zillow Group is
committed to empowering consumers with unparalleled data,
inspiration and knowledge around homes, and connecting them with
the right local professionals to help. The Zillow Group portfolio
of consumer brands includes real estate and rental marketplaces
Zillow®, Trulia®, StreetEasy®, HotPads®, and Naked Apartments®. In
addition, Zillow Group works with tens of thousands of real estate
agents, lenders and rental professionals, helping maximize business
opportunities and connect to millions of consumers. The company
operates a number of business brands for real estate, rental and
mortgage professionals, including Mortech®, dotloop® and Bridge
Interactive™. The company is headquartered in Seattle.
Zillow, Mortech, StreetEasy, Retsly and HotPads are registered
trademarks of Zillow, Inc. Trulia is a registered mark of Trulia,
LLC. dotloop is a registered trademark of DotLoop, LLC. Naked
Apartments is a registered trademark of Naked Apartments, Inc.
Bridge Interactive, Contact, Cheque and Compose are trademarks of
Bridge Interactive Group, LLC.
[i] These are findings from an Ipsos poll conducted January 26 – 27, 2017 on behalf of
Zillow. For the survey, a sample of 1,005 U.S. adults over the
age of 18 was interviewed online, in English, including 379 adults
who say that they plan to purchase a home within the next three
years.
[ii] '2015 Interest Rate Survey' was conducted Nov. 30, 2015 through Dec
2, 2015 by ORC International on behalf of Zillow, Inc. For
the survey, a sample of 1,010 adults was interviewed online, in
English.
[iii] According to the January 2017
Zillow Home Value Index.
[iv] Effect of a 25-basis point increase in mortgage rates,
assuming 30-year fixed rate increases from 4% to 4.25% with a 20%
down payment, on the median home value of $195,300.
[v] Effects of a 50- basis point increase (from 4% to 4.5%) and
100-basis point increase (from 4% to 5% in mortgage rates, assuming
a 20% down payment, on the median home value in those metros.
[vi] Monthly payment on median home value in San Francisco would increase by $396 and monthly payment on median home in
San Jose would increase by
$460, assuming 30-year fixed rate
increases from 4% to 5%. Both calculations assume a 20% down
payment.
[vii] The Zillow Home Value Index (ZHVI) is the median estimated
home value for a given geographic area on a given day and includes
the value of all single-family residences, condominiums and
cooperatives, regardless of whether they sold within a given
period. It is expressed in dollars, and seasonally adjusted.
[viii] Average 30-year fixed rate, assuming a 20% down payment on
the median ZHVI within that region.
[ix] Average 30-year fixed rate, assuming a 20% down payment on the
median ZHVI within that region.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/home-buyers-say-rising-interest-rates-are-top-concern-300412966.html
SOURCE Zillow Group