Sentiment is higher amid positive economic news
First-time home buyers are not deterred by the rise in mortgage rates because they are buoyed by positive news on the economy.
Sentiment is strong and buyers are keen to buy, even if rates reach 5.6% according to the First American Real Estate Sentiment Index.
“According to the title agents and real estate professionals surveyed, nearly 87% of first-time home buyers were in the prime home-buying age of 26-35, which corresponds with the millennial generation,” said First American chief economist Mark Fleming.
The poll shows that rates would need to rise another percentage point before first-time buyers started to pull back from the market. Just a year ago, a rate of 5.4% would have been the likely tipping point.
“This may indicate they realize that the housing market is more resilient to mortgage rate increases than they thought a year ago,” added Fleming.
Inventory remains the big challenge
While interest rates may not hit demand among first-time buyers, lack of choice might.
More than a third of the professionals polled said that inventory is the top barrier (35.3%) for new entrants to the housing market, followed by affordability (30.1%), and down payment (28.3%).
Purchase market outlook positive
Fleming said that overall optimism among title agents and real estate professionals decreased this quarter, with expectation for refinance volumes to fall.
“However, while their outlook fell for purchase transaction volume growth from last quarter, it remains positive,” said Fleming. “Increasing mortgage rates clearly impacted optimism for the refinance market.”