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Prospective home buyers leave a property for sale during an Open House in a neighborhood in Clarksburg, Maryland.
Roberto Schmidt | AFP | Getty Images
The majority of would-be homebuyers expect mortgage rates to continue their recent decline, and it's one of the main reasons why they're waiting to make a purchase, according to the findings of a new CNBC Housing Market Survey.
Rates have been creeping down over the last few months and are hovering around the lowest level in a year, with the average rate on the popular 30-year fixed loan now sitting at 6.17%, according to Mortgage News Daily. But nearly three-quarters of real estate agents surveyed by CNBC said most of their buyers think rates will come down further.
"My biggest challenge is when buyers hear predictions of future rate decreases, which in turn have buyers sit on the sidelines and wait to see how low they will go instead of getting out there and buying now," said Maureen States, a real estate agent in Pittsburgh.
The CNBC Housing Market Survey is a national inquiry of real estate agents selected randomly across the United States. Responses were collected between Sept. 22 and Sept. 30. This quarter, 54 agents shared what they're seeing in their market.
Most agents said they consider the current conditions to favor buyers over sellers, but they still listed affordability as the No. 1 reason why buyers are delaying their purchases.
Despite optimism that mortgage rates will continue to fall, agents said rates are still buyers' top concern. That was followed by uncertainty in the economy and then just overall affordability.
That sentiment appears at least somewhat divorced from reality, however: 44% of agents reported prices are decreasing in their areas, and just 20% said they are rising.
"Sellers are still pricing for a seller's market, and buyers are willing to wait for prices and rates to drop. It is a bit of a standoff, and folks are only moving if they absolutely must," said Katie Kosnar, an agent in North Carolina serving Raleigh and Durham. "Right-sizing used to be a driving factor, but most sellers I've encountered will be paying a higher mortgage for a smaller house and just aren't willing to make that move."
As a result, buyers are using interest rate buydowns or turning to adjustable-rate mortgages, which offer lower interest rates, in order to offset price pressures.
Roughly 40% of survey respondents said their buyers are borrowing money from family or friends in order to afford a home. Buyers are also compromising on home size, location or features in order to bring the price down, agents said.
The vast majority of agents in CNBC's survey said they expect home sales to either improve slightly or stay about the same in the next quarter, and about 17% expected sales to drop. Of course this varies by location, with some of the markets that heated up the most during the pandemic seeing the steepest declines, and other more affordable markets seeing bigger gains.
As for sellers, agents reported the biggest concern among that group is how long it will take to find a buyer. Some are concerned they're pricing their home too low, and sellers, too, are watching mortgage rates closely, agents said.
About 89% of agents who took CNBC's survey reported having at least one seller reduce their asking price, and nearly a third said more than half their sellers dropped prices.
Roughly 40% of agents said they had at least one seller delist their home, hoping to get a better price later.
Home prices continued to rise on an annual basis through August, according to several other national indexes, but the price gains are shrinking. Prices are gaining most in the Northeast and Midwest and weakening most 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 August, according to Zillow.
New listings usually drop 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 9% monthly tumble seen over the past seven years, also according to Zillow.
Inventory has made solid gains over the past year, but it is still historically tight, especially for more affordable properties.
"For buyers, low inventory and mortgage rates, from an affordability standpoint, are still a challenge," said Holly David, an agent in Richmond, Virginia. "For sellers who are locked in to a 3% [mortgage] rate, even though they may have a housing want or need, they may not be willing or able to make a move."
