The Catch-22 of Low Mortgage Rates: Homeowners Delay Home Sales

Realtor.com and HarrisX conducted a recent survey that found more than 80% of homeowners looking to sell their homes feel "locked in" by their lower mortgage rates. Specifically, 56% of those planning to sell within the next 12 months are waiting for mortgage rates to come down before listing their homes. Meanwhile, another 25% plan to sell for personal reasons regardless of the rates. This Catch-22 situation arises because homeowners who locked in a 30-year fixed-rate in the 2-3% range don't want to exchange it for a higher rate in the 6-7% range.

From 2017 to 2022, the number of Millennial homeowners increased by 7 million, thanks to record-low rates for buying, upgrading, or refinancing homes brought on by the pandemic. However, 92.6% of homeowners were paying less than 6% as of the third quarter of 2022, the most recent data available, according to the Federal Housing Finance Agency.

Mortgage rates fell slightly for the first time in two months last week, resulting in more than a 5% increase in mortgage applications. However, high rates still affect the available housing inventory, as sellers are uncertain about their new mortgage rates. Existing home sales increased by 14.5% in February, representing the largest monthly percentage increase since July 2020. But the US had about 2.6 months of existing home inventory, down 10.3% from inventory in January, when the data was released in late March.

Despite concern over mortgage rates, sellers remain confident about their home equity. Nearly 85% of potential sellers are satisfied with the amount of equity they have in their homes, with 74% estimating their equity to be over $100,000, and 20% estimating it to be over $300,000. Moreover, 33% of potential sellers believe they can make a profit on their home sales despite the fluctuating market conditions.

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Source: https://www.investopedia.com/low-mortgage-rates-locking-in-potential-home-sellers-7480995