The Impact of the 5.5% Mortgage Rate Today

The Current Situation
Despite expectations that the Federal Reserve's decision not to raise interest rates would keep mortgage rates stable, the rates for a 30-year fixed-rate mortgage have actually increased to their highest levels since 2000.
House prices are rising along with mortgage rates, mainly due to low inventory, which is causing hesitation among both buyers and sellers.
The "Magic Number" 5.5%
Research by John Burns Research & Consulting has found that 5.5% is a crucial tipping point for mortgage rates. Beyond this rate, most consumers say they won't buy a home.
Even though rates have been between 6.5% and 7.5% recently, consumer attitudes towards this "magic number" haven't changed.
Consumer Behavior
Consumers have gotten used to low rates, with most having mortgage rates below 4% due to moving or refinancing during the COVID-19 pandemic's record lows.
A significant 82% of consumers say they're not willing to give up their low rates to move, contributing to a decline in new home listings and overall for-sale housing inventory.
Why is 5.5% Special?
Mortgage rates stayed below 5% for 12 consecutive years, during which most borrowers bought or refinanced their homes. 90% of current borrowers have a rate below 5.5%.
Consumers generally can't afford mortgage payments at rates higher than 5.5%. This is why strategies like rate buydowns (prepaying for interest points to reduce monthly payments) are effective for homebuilders.
Many consumers are waiting for rates to drop below 5.5%, and 88% believe this will happen within the next five years.