Most millennials, desperate to get on the housing ladder, would consider accepting a mortgage rate that’s higher than the national average of below 7%, a recent survey said.
The post-pandemic housing market has been defined by runaway mortgage rates and surging home prices, according to the Real Estate Witch survey. Yet, 78% of millennials still hold onto the dream of homeownership.
However, the affordability challenges of the current housing market are why 48% don’t think they can achieve this milestone. Overall, 93% of millennials say these challenges impacted their home-buying plans, with 50% citing high interest rates as the most significant barrier to homeownership. Moreover, 76% worry market dynamics will worsen before buying a home.
“It’s no surprise, then, that 67% of millennials regret not purchasing a home when interest rates were lower,” Real Estate Witch said. “But a majority of young home shoppers aren’t deterred by high rates. More than 3 in 4 millennial home buyers (78%) would consider accepting an interest rate that’s higher than the national rate of about 7%. What’s more, 65% would accept an interest rate of 10% or more, while 23% would accept a rate of 15% or more.”
Homebuyers can find the best mortgage rate by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates, choose your loan term, and get preapproved with multiple lenders at once.
Fifty-seven percent of millennials said they planned to purchase a home that costs less than $400,000 despite the median U.S. home price costing $431,000, the survey said. High interest rates and inflation make buying a home costly for many millennials.
The Federal Reserve announced a third interest rate pause during its December meeting, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%, but indicated it could begin scaling back rates this year. That could help push the mortgage rate lower.
Still, home prices keep climbing and now stand 4.8% above their year-ago level, while the 10- and 20-city composite indices were up 5.7% and 4.9%, respectively, according to the latest S&P CoreLogic Case-Shiller Indices report.
“Although interest rate hikes have caused the inflation rate to drop, home prices remain near record highs,” Real Estate Witch said. “Consequently, 70% of millennials say inflation is still affecting their home-buying plans. About 30% of millennials expect to max out their budgets in response to high prices, but even then, 35% are concerned they won’t be able to find an affordable home.”
If you are looking to take advantage of the current mortgage rates by refinancing your mortgage loan or are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.
To afford a home today, millennials said they would take drastic measures, such as:
Here are other measures Americans can take to make their dream of homeownership a reality:
Buyers can save additional money on home financing by understanding and improving their credit profile. A recent Zillow analysis showed that borrowers with an “excellent” credit score — between 760 and 850 — could be saving up to $103,626 in mortgage interest payments over the life of a 30-year fixed-rate loan, based on a typical home priced at $354,165.
Nearly half of the millennials (47%) participating in the Real Estate Witch survey said they planned to put down less than 20% on a home. However, a sizable down payment can help lower your monthly mortgage payment.
Researching down payment assistance programs can help to defray closing costs. Freddie Mac is leading the initiative to streamline documentation to access its down payment assistance (DPA) programs to connect more lenders and homebuyers to this help.
If you’re ready to shop around for a mortgage loan, you can use the Credible marketplace to help you easily compare interest rates from multiple mortgage lenders and get prequalified in minutes.
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