Homeowners with a mortgage rate above 5 percent are nearly twice as likely to say they plan to sell their home than those paying a rate below 5 percent, according to a Zillow survey. About 80 percent of mortgage holders reported having a mortgage rate of less than 5 percent and about 90 percent have a rate of less than 6 percent. Almost one-third reported a rate of less than 3 percent.
As today’s mortgage rates near 7 percent, a vast majority of homeowners would need to finance a new home at a higher rate than they currently hold, adding hundreds of dollars a month to their mortgage payment. Zillow said this helps explain why 28 percent fewer new for-sale listings hit the market in June than a year ago.
“We expect mortgage rates may notch down slightly as inflation comes under control, but they are unlikely to return to 5 percent in the near future,” Orphe Divounguy, a senior economist at Zillow Home Loans, said in a release. “That means many homeowners will move only for major life events, like a new baby or retirement. Over time, homeowners will likely accept higher rates as the new normal, but until then, the market could remain challenging for home shoppers, who will see fewer options and higher prices.”
Zillow’s survey did have some bright spots: Nearly a quarter of homeowners (23 percent) said they are considering selling their home in the next three years or currently have their home listed for sale, significantly higher than the 15 percent from a year ago. The share is even greater among mortgage holders who have a rate above 5 percent; 38 percent of those homeowners said they would consider selling their home in the next three years.