Buyers expect lower mortgage rates

The majority of potential homebuyers expect mortgage rates to continue their recent decline, and that’s one of the main reasons they’re waiting to make a purchase, according to the results of a new CNBC housing market survey.

Interest rates have been falling over the past few months and are hovering around a one-year low, with the average interest rate on the popular 30-year fixed loan now standing at 6.17%, according to Mortgage News Daily. But nearly three-quarters of real estate agents surveyed by CNBC said most buyers believe interest rates will fall further.

“The biggest challenge I face is when buyers hear expectations of lower interest rates in the future, which in turn makes buyers sit on the sidelines and wait to see how low they go instead of going out and buying now,” said Maureen Stites, a real estate agent in Pittsburgh.

The CNBC Housing Market Survey is a national survey of randomly selected real estate agents across the United States. Responses were collected between September 22 and 30. This quarter, 54 agents shared what they’re seeing in their markets.

Most agents said they consider current conditions to favor buyers over sellers, but they still list affordability as the number one reason buyers are delaying their purchases.

Despite optimism that mortgage interest rates will continue to fall, agents said rates are still the biggest concern for buyers. This was followed by uncertainty in the economy and thus overall affordability.

However, this sentiment seems somewhat disconnected from reality: 44% of agents reported that prices are falling in their areas, and only 20% said they are rising.

“Sellers are still pricing in a seller’s market, and buyers are willing to wait for rates and rates to go down. It’s a little confrontational, and people don’t move unless they have to,” said Katie Kosnar, an agent in North Carolina serving Raleigh and Durham. “Right sizing was a driving factor, but most sellers I met would be paying a higher mortgage for a smaller home and weren’t willing to make that move.”

As a result, buyers are using interest rate buydowns or switching to adjustable rate mortgages, which offer lower interest rates, in order to offset the price pressures.

Nearly 40% of survey respondents said buyers borrow money from family or friends to buy a home. Buyers also compromise on a home’s size, location or features in order to lower the price, agents said.

The vast majority of agents in the CNBC survey said they expect home sales to improve slightly or stay about the same in the next quarter, and about 17% expect sales to decline. Of course this varies by location, with some markets that saw a big rise during the pandemic seeing sharp declines, while other more affordable markets saw bigger gains.

As for sellers, agents report that the biggest concern among this group is how long it will take to find a buyer. Some are concerned that their home prices are too low, and sellers are watching mortgage rates closely, agents said.

About 89% of agents who participated in 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 prices.

Nearly 40% of agents said they had at least one seller who listed their home, hoping to get a better price later.

Home prices continued to rise year over year through August, according to several other national indicators, but price gains are narrowing. Prices are higher in the Northeast and Midwest and weaker in the South and West.

The supply of homes for sale in September was higher than it was a year ago, as were new listings after a particularly slow month of August, according to Zillow.

New listings typically decline from August to September, and while that was true this year — with new listings down 2% month-to-month — it was a smaller decline than the average monthly decline of 9% seen over the past seven years, also according to Zillow.

Inventory has made strong gains over the past year, but it remains historically tight, especially for 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 insured at 3% [mortgage] Although they may have a desire or need for housing, they may not be willing or able to move.”