News & Opinions
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Can Homebuilders Teach Mortgage History to Wary Millennials?
Kyle Stock / Bloomberg/BusinessWeek / July 26, 2013
What a difference a percentage point makes. A slight rise in U.S. mortgage rates—the average for a 30-year fixed mortgage inched from about 3.3 percent in May to 4.3 percent this week—is spooking would-be home buyers and complicating forecasts for builders. Much to the agony of those builders, younger consumers appear transfixed by the shockingly low rates of recent years without paying any mind to historical mortgage norms.
Skittish buyers have become more worried about rising rates than they are about surging home prices, according to a new survey from real-estate data company Trulia. Some 41 percent of respondents cited interest rates as their top concern, compared with 37 percent who pointed to prices. “We did anticipate that it would be a big concern; we just didn’t realize quite how much,” says Trulia spokeswoman Daisy Kong. “Low interest rates were the one thing people were able to count on for a while.”
And financing jitters aren’t just showing up on studies—those anxieties were abundantly evident in a round of reports from big U.S. homebuilders this week. D.R. Horton posted only a 12 percent increase in new orders for homes from the year-earlier period, less than half the amount expected, while PulteGroup saw its orders drop 12 percent. “A lot of buyers were counting on trying to pick the low in the pricing and the low in the interest rates,” D.R. Horton’s chief executive, Donald Tomnitz, said on a conference call.