SAN FRANCISCO–Even if mortgage rate averages should top 5% just 6% of potential homebuyers said it would cause them to cancel their plans, according to a new survey.
That same survey found the tax reform debate may have fueled anxiety, as high taxes were the most common economic concern, cited by 38% of respondents.
In the national survey of homebuyers conducted by Redfin most people in the market for a home said they were unfazed by the prospect of rising mortgage rates. After hovering below 4% at the end of 2017, the average 30-year fixed mortgage rate surpassed 4% in January and has been steadily rising.
Twenty-seven percent of respondents who plan to buy a home in the coming year told the Redfin survey that a 5% mortgage rate would slow their plans to buy, down two points from responses to a similar question in May.
Only 6% of respondents who plan to buy a home in the coming year said that a 5% mortgage interest rate would halt their plans to buy, a modest one-point increase from responses to a similar question in May, Redfin noted. Meanwhile, 21% said they would look in other areas or buy a smaller home, up three points from May. A quarter said such a hike would have no impact on their plans, consistent with our last survey, Redfin reported.
The late-2017 tax reform debate may have fueled anxiety as high taxes were the most common economic concern, cited by 38% of respondents.
Meanwhile, Redfin noted that final changes to tax code for 2018 resulted in a $10,000 cap on state and local tax deductions.
When asked about concerns facing the U.S. economy, the most oft-cited response was high taxes, with 38% choosing it among their top three concerns. Affordable housing ranked second at 33%, followed by the income gap between the rich and poor, as cited by 28% of respondents.
Not surprisingly, Redfin reported respondents in California, where residents pay among the highest state, local and property taxes in the country, were even more likely to name high taxes as a top concern, cited by 43% of San Franciscans, 45% of San Diegans and 42% of Sacramento-based respondents. Surprisingly, less than one-third of Los Angelinos cited high taxes as a top concern, Redfin said, though it was still the most common response, followed closely by affordable housing with 30% of respondents.
By contrast, affordable housing was the most frequently cited economic concern among respondents in other parts of the country including Seattle (45%) and Portland (44%), where the income gap between the rich and poor ranked second and high taxes ranked third. Affordable housing also ranked highest among Denver-based respondents (46%), with high taxes following behind (30%) Redfin said.
Redfin added that it is projecting in 2018 it expects tax reform to accelerate the migration pattern it saw during 2017, away from expensive coastal cities and toward more affordable inland communities.
The Redfin survey found the vast majority of respondents agreed that home prices will continue to rise in 2018. Only 6% of respondents said they expect any decline in prices, and only 1% said they expect prices to fall significantly. Most respondents (52%) said they expect prices to rise slightly, while another 25% said they expect a significant increase in prices and 17% said they expect no change at all.