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What are today's homebuyers concerned about?

March 21, 2017

With the spring buying season now just around the corner, consumers are turning their attention to whether they'll be able to actually participate in the bustling housing market. Of course, many of them have preconceived notions and issues about how well they're going to fare, and it's important to understand where those anxieties come from and what can be done - if anything - to address the more pressing ones.

"53% of people shopping for a home say their biggest concern is mortgage rates."

Today, more than half of all people currently shopping for a home say their biggest concern is how mortgage rates are rising, according to new data from Zillow. Experts say they're right to be worried, because rates have not only risen to higher levels than those seen most of last year, but they're also likely to keep growing.

Affordability on the mind
The concerns about mortgage rates are certainly related to the overall worries shoppers still carry about affordability overall, because nearly 2 in 3 respondents also recognize the issues related to a constrained housing inventory and and the inflationary effect it has on home prices, the report said. Worries about rising home prices are actually down somewhat from where they were in the same survey a year ago (falling from 73 percent) but rising rate concerns have ticked up. Meanwhile, nearly 3 in 5 also said they were uneasy about being able to save for a down payment.

However, 83 percent of current shoppers still say they plan to buy within the next three years despite those worries, even if their monthly mortgage costs rise another $100, the survey found. However, if those costs were to rise by $200 during that time, more than half of respondents would discontinue their home searches.

Where to live?
Meanwhile, more research from Zillow found that families that want to live in the city can, unsurprisingly, expect to pay far more each year than those who choose to live in the suburbs instead. In fact, the average cost to live in a city across the entire U.S. is more than $9,000 per year greater than what suburbanites pay when it comes to basic costs related to housing and childcare.

"More than a third of families exceed their initial budget when buying a home, according to the Zillow Group Consumer Trends Report, so before embarking on a move, consider the cost of living beyond just the home's sticker price," said Svenja Gudell, Zillow chief economist.

"Buyers need to save two-thirds of their incomes to make a 20% down payment."

Indeed, Zillow data shows that buyers now need to save an average of two-thirds of their annual income to make a 20 percent down payment on a median-priced home. Some places have higher price tags than others, of course; buying in San Jose, California, requires the median worker to save 182 percent of his or her income to buy a median-priced home, while those shopping in Pittsburgh, Indianapolis, or Kansas City only need 48 percent to make a purchase.

With concerns about costs clearly front and center for many buyers, it's important to note that the sooner people get into the market, the more likely they will be to lock in the lowest price and mortgage rates they're going to see soon. Both are only expected to keep rising for some time to come.

 

 

 

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