The housing market has been a hot topic for the past year, with low inventory and high demand leading to record-breaking prices. But what’s causing this lack of supply? According to Mark Fleming, Chief Economist at First American, there are two big issues at play.
The first issue is rate-locked homeowners. While current homeowners have an average interest rate of less than 4%, the typical mortgage rate offered to buyers today is over 6%. This higher borrowing cost is causing many homeowners to stay put and avoid moving, a situation known as being rate locked. This means that there are fewer homes available for sale, which can drive up prices even further.
The second issue is the fear of not finding something to buy. Many potential sellers are hesitant to put their homes on the market because they’re worried they won’t be able to find another home to buy if they move. This fear has left many on the sidelines, waiting for more homes to come to the market.
So, what does this mean for you if you’re thinking about selling your home? Despite the low inventory, today’s market is actually a sweet spot for sellers. Mortgage rates are projected to gradually fall this year, which could entice more homeowners to move. And if you do decide to sell, you may have more equity in your home than you realize. According to ATTOM, 48% of mortgaged residential properties in the US were considered equity-rich in the fourth quarter of 2022.
If you’re on the fence about selling, it’s important to explore all your options with your agent. That could include newly built homes, especially right now when builders are offering concessions like mortgage rate buydowns. By leveraging your current home equity, you may be able to keep the cost of your next home down.
In conclusion, rate-locked homeowners and the fear of not finding something to buy are the two big issues holding back the housing market right now. But as mortgage rates start to come down and homeowners explore all their options, we should expect more homes to come to the market.