The biggest challenge the housing market’s facing is how few
homes there are for sale. Mark Fleming, Chief Economist at First American,
explains the root causes of today’s low supply:
“Two dynamics are keeping existing-home inventory
historically low – rate-locked existing homeowners and the fear of not finding
something to buy.”
Let’s break down these two big issues in today’s housing
According to the Federal Housing Finance Agency (FHFA), the
average interest rate for current homeowners with mortgages is less than 4%
(see graph below):
But today, the typical mortgage rate offered to buyers is
over 6%. As a result, many homeowners are opting to stay put instead of moving
to another home with a higher borrowing cost. This is a situation known as
being rate locked.
When so many homeowners are rate locked and reluctant to
sell, it’s a challenge for a housing market that needs more inventory. However,
experts project mortgage rates will gradually fall this year, and that could
mean more people will be willing to move as that happens.
The Fear of Not Finding Something To Buy
The other factor holding back potential sellers is the fear
of not finding another home to buy if they move. Worrying about where they’ll
go has left many on the sidelines as they wait for more homes to come to the
market. That’s why, if you’re on the fence about selling, it’s important to
consider all your options. That includes newly built homes, especially right
now when builders are offering concessions like mortgage rate buydowns.
What Does This Mean for You?
These two issues are keeping the supply of homes for sale
lower than pre-pandemic levels. But if you want to sell your house, today’s
market is a sweet spot that can work to your advantage.
Be sure to work with a local real estate professional to
explore the options you have right now, which could include leveraging your
current home equity. According to ATTOM:
“. . . 48 percent of mortgaged residential properties in
the United States were considered equity-rich in the fourth quarter, meaning
that the combined estimated amount of loan balances secured by those properties
was no more than 50 percent of their estimated market values.”
This could make a major difference when you move. Work with
a local real estate expert to learn how putting your equity to work can keep
the cost of your next home down.
Rate-locked homeowners and the fear of not finding something
to buy are keeping housing inventory low across the country. But as mortgage
rates start to come down this year and homeowners explore all their options, we
should expect more homes to come to the market.
Source: Real Estate with Keeping Current Matters