Two-thirds of Americans would welcome a recession if it meant lower mortgage rates, new survey shows

The majority of prospective homeowners say they are ‘ready for a recession’ if it means mortgage rates will decrease.

Buying a home has become increasingly unaffordable in the US – with borrowing costs spiking and housing inventory at a near-record low.

As a result, 64 percent of Americans said they would not mind economic downturn if it meant they were more likely to get on the property ladder, according to a Credit Karma study for USA Today.

Mortgage rates have dipped below their peak of more than 7 percent last year, but the average 30-year fixed deal hit 6.69 percent for the week ending June 15, according to broker Freddie Mac. 

‘There is no denying how difficult it’s become to purchase a home in America today, especially for first-time buyers,’ Aniva Hinduja, from Credit Karma, told the outlet. ‘When a majority of potential home buyers are wishing for a recession so they can afford a mortgage, you know the situation is dire.’

The survey, conducted by Harris Poll on behalf of Credit Karma, quizzed over 2,000 Americans who had purchased a home in the last two years or planned to buy in the next three years. 

Some 82 percent of those surveyed believe the country is facing an unprecedented housing affordability crisis, while 61 percent who had never before purchased a home said they did not think they would ever be able to.

According to USA Today, the situation is also difficult for recent homebuyers.

Despite the Federal Reserve last week pressing pause on interest rate hikes, the last ten consecutive increases have taken their toll. 

Some 46 percent of homeowners who bought in the last year reported that they are struggling to keep up with their monthly mortgage payments.

While the Federal Reserve does not set mortgage rates, average deals are influenced by its actions, alongside other factors including inflation. 

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Experts suggest mortgage rates are now likely to remain around current levels in the immediate future. If the Fed delayed hiking rates again – and implemented a longer-term pause – home loan costs could finally start to fall. But likewise, if rates rise twice more as suggested, they could also rise again. 

Economists have been split as to whether the US is heading for a recession, or whether it might be able to weather the financial storm.

Some have predicted that the country could enter a ‘rolling recession’ – meaning individual sectors decline in turn rather than all at once.  

It comes after a report showed would-be homebuyers are increasingly being forced to sit on the sidelines, as affluent cash-buyers take advantage of their ability to avoid soaring monthly mortgage payments. 

Real estate brokerage Redfin found elevated rates are deterring those who plan to finance their purchase with a mortgage more than they are deterring all-cash buyers.

Some 33.4 percent of US homebuyers did not borrow money in April, which is comparable with February’s 33.5 percent share of all-cash purchases – the highest in nine years.

With a scarce number of homes for sale, all-cash buyers are making up a larger proportion as they are able to increase their offers to outbid the competition, and they do not need pre-approval from a lender. 

Sheharyar Bokhari, senior economist at Redfin, said that those who can’t afford to pay in cash have two options in the current climate.

‘They can avoid a high mortgage rate by dropping out of the housing market altogether, or they can take on a high rate,’ he said.

‘That discrepancy is the reason the all-cash share is near a decade high even though all-cash purchases have dropped: Affluent buyers have the choice to pay cash instead of dropping out of the market.’ 

According to data from the Bank of Montreal earlier this month, nearly two thirds of Americans are waiting on mortgage rates to drop before they buy a home.