Potential homebuyers respond negatively to higher mortgage rates
About 25% of potential homebuyers react with foolish urgency, but nearly half respond by either substituting down in quality, delaying their purchase, or canceling it altogether.
The national association of realtors is notorious for spinning data to support a false narrative the instills urgency with potential homebuyers. The minions working for the association routinely seek out data points supporting their narrative even when that narrative doesn’t mirror reality — in fact, the less their narrative reflects reality, the more they work to spin the data.
For example, NAr pending home sales data is worthless and misleading. realtors represent themselves as experts on real estate whose advice can be relied upon by market participants. However, realtors care not whether it’s truly is a good time to buy or sell because for them, it’s always a good time to generate a commission. This conflict of interest causes realtors to be self-serving liars who line their own pockets at the expense of the people they ostensibly serve.
Back in early 2011, I reported the National Association of realtors caught lying about home sales. Later, Reuter’s reported Existing home sales to be revised down from 2007, and ZeroHedge noted US Housing Market Was Artificially Inflated By 14% In 2007-2010 NAR Reports. The NAr would like everyone to believe these were “honest” mistakes.
When in doubt, assume every word a realtor utters is either a lie or bullshit (a manipulative statement made without regard to truth). Once you put on that filter, it becomes obvious when the NAr spin machine goes into overdrive.
Current NAr nonsense
The NAr supported a number of bogus narratives over the last few years. Remember the bad weather excuse for poor sales back in 2014? That one later morphed into the low inventory excuse., the excuse that ignores the myriad of market manipulations used to drive up prices.
Since Donald Trump’s election, the NAr spin machine kicked into overdrive to convince skittish buyers and nervous sellers that rising mortgage rates won’t impact housing. Unfortunately for them, buyers fail to buy their message.
Written by Alex Starace on December 20, 2016
Last week, the average 30-year fixed-rate mortgage rose to 4.16 percent, while the Federal Reserve raised the federal funds rate for the first time in a year, and only the second time this decade.
How does this affect homebuyers? …
Very few homebuyers would stop their search, according to a recent Redfin-commissioned survey of people planning to buy a home in the next year. When asked “If mortgage rates were to rise above the current 4%, what effect would it have on your home-buying plans?” only 2.6 percent of respondents said they’d cancel their search.
If Mortgage Rates Rose Above the Current 4%, What Effect Would it Have on Your Homebuying Plans?
- I’d increase my urgency to buy before rates went up further 23.80%
These are the fools NAr propaganda seeks to motivate with fear tactics. If someone can be convinced they must buy now or be priced out forever, they will respond with urgency, which is what realtors want.
- My urgency wouldn’t change, but I’d have to look in other areas or buy a smaller home due to increased payments 22.60%
These are the realists who recognize that they will afford less. Their desire to own is so strong, they will buy anyway, but if rates move up so high that owning forces them to move to a lower quality property than what they currently rent, fewer and fewer potential homebuyers will actually go ahead with the transaction.
- No impact 25.30%
Many people shop at price points well within their means — at least outside of California. These people will not be affected by rising rates.
- I’d slow down my search and see if rates come back down again 25.80%
- I’d cancel my plan to buy a home 2.60%
This quarter of potential homebuyers are the nightmare of realtors. Despite the bogus spin about homebuyers being so resilient. Rising mortgage rates will cause a quarter of them to become fence-sitters. Some will be priced out of their desired locations and may opt to keep renting permanently.
Why are homebuyers so resilient? While there’s no definitive answer, often homebuyers are searching for a new home because of a major life event, such as a birth or a marriage or a job relocation, which can’t easily be timed to the market — but which still motivates a purchase along its own timeline.
When someone is ready, they are ready. If rates don’t move too high in 2017, I may even buy a primary residence. When it’s time, it’s time.