The rising cost of purchasing a home is finally sinking in for home buyers and changing their house hunt, particularly for millennials.
Seventy-nine percent of all consumer age groups recently surveyed say that rising interest rates will impact their home search, while 83 percent say that increasing home prices will impact theirs, according to a new online survey released by realtor.com® of more than 1,000 active buyers. But those percentages rise to 92 percent and 93 percent respectively for buyers ages 18 to 34.
The rising prices and rates are having the biggest impact on millennials because they have a greater likelihood of carrying student loan and other debt, and often have less put aside for a down payment than other buyers, the survey notes.
“Existing debt and lower down payments leave younger shoppers more exposed than others to the impact of rising mortgage rates and record-high home prices,” says Danielle Hale, chief economist for realtor.com®. “These obstacles won’t prevent millennials from finding and buying homes, but most will have to adapt to these challenging market conditions by adjusting their home search.”
Overall, buyers said the rising rates and prices will motivate them to shop for a smaller, less expensive home or to search in a different neighborhood. Millennials are the most motivated to search for a smaller, less expensive home than older generations due to the higher rates and home prices. Thirty-three percent of buyers said the higher costs will motivate them to put down a larger down payment, and 31 percent intend to increase their monthly mortgage budget.