According to Mark Fleming, Chief Economist at First American, the primary obstacle faced by the housing market is the scarcity of available homes for sale, which is caused by a number of underlying factors.
“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 market.
Rate-Locked Homeowners
According to the Federal Housing Finance Agency (FHFA), the average interest rate for current homeowners with mortgages is less than 4% (see graph below):
At present, the average mortgage rate available to buyers is in excess of 6%. Consequently, numerous homeowners are choosing to remain in their current residences rather than relocating to a new property with a higher borrowing expense. This condition is referred to as being “rate-locked.”
The housing market is currently facing difficulty in sourcing new inventory due to the large number of homeowners who are rate locked and hesitant to sell. Nevertheless, specialists predict that mortgage rates will gradually decrease over the course of this year, which may encourage more people to consider moving.
The Fear of Not Finding Something To Buy
Another factor that is deterring potential sellers is the apprehension of being unable to find a suitable replacement home if they do decide to sell. This fear has caused many people to delay listing their homes until more inventory becomes available. Therefore, if you are undecided about selling, it is crucial to explore all available options, including newly constructed properties. At present, builders are providing incentives such as mortgage rate buydowns, making this an opportune time to consider new home construction.
What Does This Mean for You?
The combined effect of these two problems is that the supply of available homes for sale remains lower than it was before the pandemic. Nonetheless, if you are looking to sell your house, the current market conditions present a promising opportunity to do so profitably. It is highly recommended that you collaborate with a local real estate expert to determine the options available to you at present, including 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 strategy has the potential to significantly impact your relocation expenses. To discover how you can utilize your home equity to reduce the cost of your next property, seek guidance from a nearby real estate professional.
Bottom Line
Homeowners who are rate-locked and concerned about finding suitable properties to purchase are responsible for the shortage of housing inventory throughout the nation. Nevertheless, as mortgage rates gradually decrease this year and homeowners investigate all available options, we should anticipate an increase in the number of homes available for sale.
LK Marketing and Real Estate 
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