5% Mortgage Rate: The Tipping Point for U.S. Homeowners, Says Zillow Survey

U.S. homeowners are nearly twice as likely to sell their properties if their mortgage rate is 5% or higher, according to a quarterly survey by Zillow. However, only one in five mortgaged homes meets this criterion. This percentage point has been identified as a significant factor, with 38% of homeowners with at least a 5% rate planning on selling, compared to just 21% of those with lower rates. Existing-home sales have declined since last year due to higher mortgage rates, leading prospective buyers to seek new construction.

The survey revealed that approximately 80% of mortgage holders have a rate of less than 5%, and about 90% have a rate of less than 6%. Almost a third reported a rate of less than 3%. Despite these trends, Orphe Divounguy, a senior economist at Zillow Home Loans, believes that mortgage rates are unlikely to return to 5% in the near future, meaning many homeowners will only consider moving for major life events.

However, the study also found that nearly a quarter of homeowners are considering selling their home in the next three years or currently have their home listed for sale, a considerable increase from the 15% who reported the same last year. This indicates that inventory might soon increase, reflecting factors beyond mortgage rates, such as upgrading to a nicer home or accommodating a growing family, influencing the decision to sell.

The current tight supply in the resale market has resulted in elevated home prices, with Zillow’s latest report showing that home values reached a record high in June, exceeding $350,000 nationally for the first time. Values also increased in all of the 50 largest metro areas for the second consecutive month, highlighting the continuing strong demand and potential challenges for new buyers entering the market.

This article was originally published on Quiver Quantitative