Study: Buyers Have $33K More in Purchasing Power
September 4, 2020
Low mortgage rates are enabling home buyers to stretch their budgets more this year. Buyers can afford about $33,250 more on a home purchase compared to a year ago—a 6.9% increase, a new Redfin study shows. However, an 8.2% uptick in year-over-year home prices essentially is canceling out those savings.
Buyers are still being drawn into the market by the low mortgage rates, however. Fifty-five percent of consumers who are moving for pandemic-related reasons say that low mortgage rates are a motivating factor in their homebuying plans, according to the Redfin survey of about 1,000 consumers who plan to buy a home within the next 12 months.
That said, low mortgage rates can be a catch-22. “Low mortgage rates are motivating many people to purchase a home, particularly those who want more space to work from home,” says Daryl Fairweather, Redfin’s chief economist. “But because there hasn’t been an increase in the number of homes for sale since rates started dropping with the onset of the pandemic, many buyers end up competing for the same homes, driving up prices. Those competing forces make the current market a wash for many buyers looking for single-family homes in competitive areas. Buyers searching for condos can find a better deal, both an overall price and mortgage payments, because most condos are less competitive than single-family homes as people move out of densely populated urban areas.”
Updated: October 29, 2020