This browser does not support the Video element.
Real estate report: Housing market predictions
Spring is just around the corner, which typically marks a rising real estate market but interest rates could hold the housing sector back. LiveNOW's Lexie Petrovic spoke about real estate with FOX Business contributor Katrina Campins.
null - One in every five potential U.S. homebuyers are willing to sacrifice their safety in order to afford a home over the coming year, according to a recent Redfin report.
That figure is even higher for younger house hunters.
Gen Z more willing to trade safety for an affordable home
According to the real estate firm's latest data, 23.7% Gen Z respondents said they are willing to compromise their physical safety to afford a home. Just over 18% of millennials and 17.5% of Gen Xers are also willing to do the same but only 5.5% of Baby Boomers said they'd risk their safety for cost.
That's according to the Redfin-commissioned survey of roughly 3,000 U.S. homeowners and renters conducted by Qualtrics in February.
RELATED: A $1 million starter home? It’s becoming the norm in these cities
Gen Z sacrifices
FILE - A For Sale sign displayed in front of a home on February 22, 2023 in Miami, Florida. (Photo by Joe Raedle/Getty Images)
The issue is that younger generations are faced with a housing supply crunch where prices are sitting at all-time highs, Redfin Senior Economist Elijah de la Campa said.
"Couple that with them earning less—relative to older generations—and you can see why they are willing to make more serious sacrifices to find a home they can afford," de la Campa said, adding that "when the typical household earns less than is needed to buy or rent a typical home, house hunters can’t afford not to make sacrifices."
What’s driving the housing affordability crisis?
Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
"The decrease in sales is a stark reminder that affordability is still a challenge," Zillow Senior Economist Orphe Divounguy said in a statement in response to existing home sales falling.
"Looking ahead, inflation easing faster than previously anticipated should help to bring mortgage rates down slightly from the Spring highs, potentially supporting a late season rebound in home buying activity," Divounguy added.
RELATED: Here's where you can get the most (and least) apartment space for $1,500 a month
Mortgage rates predictions for the rest of 2024
Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates.
Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.
"Some prospective buyers are simply waiting for mortgage rates to come down after the Federal Reserve cuts rates, most likely in September," said Lisa Sturtevant, Bright MLS chief economist. "With inflation cooling and the job market still solid, rate cuts are now almost a foregone conclusion, which means those buyers who can wait are doing so."
Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.
This story was reported from Detroit. FOX Business and FOX Television Stations’ Kelly Hayes contributed.