According to a recent survey by Realtor.com®, many Americans believe that as long as mortgage rates decrease, they may be able to fulfill their dream of homeownership.

The survey found that the 5% mark is a critical number. Twenty-two percent of Americans plan to purchase homes next year, believing that achieving this goal is possible if rates drop below 6%. Additionally, 32% of Americans indicate that homebuying becomes feasible if rates fall below 5%.

Realtor.com Chief Economist Danielle Hale notes, "Even small changes in mortgage rates can have a big impact on monthly mortgage payments." For first-time homebuyers, the drop in mortgage rates increases their purchasing power. For repeat buyers who already own a home, the lower the rate, the smaller the increase in their mortgage payments.

The survey was conducted from October 31 to November 6, 2023, with over 5,000 American consumers participating, including over 1,000 who purchased homes last year and over 1,500 who plan to buy homes next year.

(David Paul Morris/Bloomberg via Getty Images)

Since October, mortgage rates have been declining. They peaked in the fall, nearly reaching 8%, but by mid-December, they had dropped to around 6% and have since fluctuated within that range.

Hale explains, "Mortgage rates have dropped a full percentage point from their peak." This means that with the same monthly payment, buyers can afford more expensive homes or purchase homes of the same price with lower monthly payments. In either case, it's a win for homebuyers.

Surprisingly, the youngest homebuyers aren't deterred by high rates. Despite being the most affected by rising home prices and mortgage rates, survey data shows that nearly half of Millennials (47%) and over one-third of Gen Z (37%) are still willing to buy homes even with mortgage rates as high as 8%.

The youngest potential homebuyers are also the most hopeful. Among surveyed Gen Z homebuyers, nearly half express a desire to buy homes within the next five years. Additionally, about one-third of Millennials (32%), 36% of Gen X members, and approximately one-fourth of Boomers (26%) share similar aspirations.

Hale points out, "It makes sense for younger buyers to be more optimistic. They face more challenges; they often have lower incomes and less savings." However, they also have plenty of time to enjoy this growing purchasing power. With their incomes now exceeding the inflation rate, their purchasing power is actually increasing.