Rising rates continue to be a minimal deterrent to buyers

Buyers entering the current housing market often face a number of challenges, including a limited number of properties for sale and higher prices on available listings. But a recent survey by the real estate site Redfin found that higher mortgage rates are rarely enough to convince someone to cancel their home search.

In early May, Redfin questioned 1,315 people in 14 major metro areas who said they plan to buy a home within the next 12 months. Just 5 percent said they would cancel their home buying plans if mortgage rates topped 5 percent.

The result was on par with similar surveys issued by Redfin in November and May of 2017. In the former survey, 5 percent said they would give up trying to find a home if rates exceeded 5 percent; in the latter survey, the share stood at 6 percent.

More people said they'd be willing to slow down their home search to see if rates decrease. Thirty-two percent said they would do so if rates hit 5 percent, compared to 29 percent in May 2017 and 27 percent in November 2017.

Similarly, fewer buyers said higher rates would spur them to try to buy a home before rates went up even more. Nineteen percent said they would react this way if rates went above 5 percent, down from 23 percent in May 2017 and 21 percent in November 2017.

"Homebuyers are well aware that higher mortgage rates means higher monthly payments, but mortgage rates remain very low, historically, and buyers will make compromises," said Taylor Marr, senior economist at Redfin. "Most of the pressure buyers are feeling is from competition for a very limited number of homes for sale. The fact that such a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent reflects their determination to be part of a housing market."

Other responses showed minimal change from the previous surveys. Twenty-four percent of respondents said higher rates would have no effect on their home search. Twenty-one percent said they would have to modify their search to keep payments more affordable, such as looking at smaller properties or homes in areas outside of their preferred neighborhood.

According to Freddie Mac, the average commitment rate for a 30-year fixed rate mortgage has risen from about 4 percent at the start of 2018 to hover around 4.5 percent. The average rate was under 4 percent for much of the period between the start of 2014 and the end of 2016.

Rates remain well below the averages from recent decades. The average rate for a 30-year fixed rate mortgage has not hit 5 percent since February 2011.