Photo: Robert Clark
Millennial homebuyers in the US are reportedly less deterred by rising interest rates than they are by the lack of affordable inventory.
Low supply and high home prices are the two biggest obstacles keeping Millennials from becoming homeowners, according to the results of the latest quarterly Real Estate Sentiment Index (RESI) survey released yesterday by First American, a title insurance and settlement services provider to the real estate and mortgage industries.
“Continued positive economic news and confidence that buyers will remain undeterred, even if rates exceed 5.5 percent, bode well for the real estate market in 2018,” First American Chief Economist Mark Fleming says in the digital release.
For the second quarter’s RESI, First American surveyed title insurance agents and real estate professionals for their perspective on how sensitive they thought first-time home buyers were to rising mortgage rates and at what rate they would withdraw from the market.
According to respondents, the three biggest obstacles to homeownership are lack of inventory, affordability and the downpayment.
The national inventory crisis is making the market especially challenging for first-time buyers to find affordable starter homes they like.
The Federal Reserve Bank of Kansas City claims the housing market is facing “its greatest supply shortage in 60 years of record keeping.”
The ongoing inventory crisis will make it hard for buyers to become homeowners — even once they are financially ready to make the leap.
More than one-third of respondents cited inventory as the biggle obstacle facing first-time homebuyers.
Respondents also predicted national mortgage rates would need to rise to 5.6 percent, which is 1 percentage point above its current level, before becoming a deterrent to first-time buyers.
Millennials reportedly make up just under 87 percent of all first-time buyers.
And, interestingly, when asked the same question in the first quarter of 2017, respondents pegged the tipping point for first-time buyers at 5.4 percent. The increase in the tipping point could be a sign that respondents see more “runway” in the housing market today compared to last year.
“This may indicate they realize that the housing market is more resilient to mortgage rate increases than they thought a year ago,” Fleming writes.
Despite the multiple hikes by the Fed expected in 2018, most real estate experts predict the national mortgage rate will only climb to about 5 percent.
Click here to read the entire release.