WASHINGTON, DC — Many would-be homebuyers are sitting out the market while they wait for mortgage rates to fall to a level they see as workable. In a Neighbors Bank survey of potential buyers, 72% said they had delayed or paused their home search until borrowing costs improve, and more than half said they want rates to hit 5% before they make an offer.
The survey, aimed at first-time homebuyers, found that 34% would buy right away if rates dropped to their target tomorrow. But the timing of that target matters: when Neighbors Bank fielded the survey in July, Freddie Mac’s weekly average for a 30-year fixed-rate mortgage was 6.49%, and on Aug. 27 Freddie Mac reported an average of 6.66%.
What The Survey Found
Neighbors Bank said several forces are keeping buyers on the sidelines. Along with rate worries, respondents pointed to economic uncertainty, hopes that prices might fall, and a lack of savings for a down payment. Eighteen percent said they were still trying to build their down payment fund.
The survey also suggested many respondents were not tracking current mortgage costs closely. Only 35% picked the correct rate range when asked about the market in July, while 45% thought the average 30-year fixed rate was above 6.5%. The lender said 41% of buyers who delayed because of rates regretted not moving sooner, and 17% said they would have bought earlier if they could redo the last year.
Why Buyers Keep Waiting
Real estate broker Steve Jolly of Nashville said buyers can run into a different problem if they wait for a perfect number: lower rates can bring more competition. Jolly said he hopes rates fall below 6% within the next five years, but he warned that trying to guess the exact bottom is difficult. His view is that buyers often focus on the loan rate without accounting for what happens to prices when demand picks up.
Nick Panize of Westgate Capital Ventures made a similar argument, saying a widely watched rate target can draw in many of the same buyers at once. That can push home prices higher even if borrowing costs ease. Panize noted that a buyer can refinance a mortgage later if rates fall, but cannot recover a higher purchase price once the home is bought.
What Comes Next
The survey’s clearest signal is that the decision to buy is still being driven by affordability concerns, not just by rate levels alone. Neighbors Bank said 67% of respondents believe home prices in their area have risen since they began looking, which helps explain why some buyers feel trapped between expensive homes and higher borrowing costs.
For buyers, the practical question is whether waiting for a 5% mortgage rate is realistic. Freddie Mac said the lowest 30-year fixed rate in the past five years came in January 2021, when the weekly average fell to 2.65%. The 5% level many respondents want has not been seen since 2022, and any buyer checking current conditions can compare weekly averages in Freddie Mac’s PMMS and survey results from Neighbors Bank.
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