How real estate consumers feel about the Federal Reserve’s recent interest rate increase may depend on whether they already own a home or are planning to buy one, according to a recent Berkshire Hathaway HomeServices survey.
On Dec. 16, the Fed announced its decision to raise interest rates from a range of 0 to 0.25 percent to current levels of 0.25 to 0.5 percent. Officials said they will also lift the interest rate gradually over the next three years.
Berkshire Hathaway’s latest Homeowner Sentiment Survey reveals a significant split in the way consumers feel about this news and how it may impact mortgage rates.
According to interviews with about 2,500 current and prospective homeowners conducted in November weeks before the Fed announced its decision, most existing homeowners are shrugging their shoulders at the notion of paying higher interest rates.
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Those who weren’t so indifferent said higher mortgage payments will probably mean they have to make some personal sacrifices such as cutting back on family vacations, home improvement projects and shopping.
However, those who haven’t yet purchased homes said that prior to the Fed’s change, they already felt mortgage rates were either “average” or “high.” More than half of the prospective homeowners surveyed — many of whom are millennials or Gen Xers — also said they felt some amount of anxiety about the impact that higher interest rates may have on their finances.
Now that interest rates have changed, many prospective homeowners said they expect to experience more difficulty in affording their ideal home and may have to alter their home searches.
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“An entire generation of first-time buyers has never experienced a meaningful rate increase,” said Berkshire Hathaway HomeServices President Stephen Phillips. “This is a new and unfamiliar phenomenon to them.”
Gino Blefari, CEO of HSF Affiliates, the real estate brokerage franchise network that includes Berkshire Hathaway, noted that a hypothetical $300,000, 30-year mortgage with a 3.75-percent interest rate can expect to see only a $43-per-month mortgage payment bump.
“A bump in mortgage rates has more bark than bite,” he said. “The average American spends about twice as much every month on coffee.”
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Agents should take care to educate buyers and sellers about the real estate process and mortgage rates, Blefari said.
“A Fed rate increase may grab people’s attention, yet the cost of borrowing money to buy a home remains historically low by all measurements,” he added. “From our perspective, mortgage rates will remain low for years to come, and that’s good for consumers and the real estate market.”
