The Two Big Issues the Housing Market’s Facing Right Now

The housing market's biggest challenge is the scarcity of available homes. First American Chief Economist Mark Fleming explains the underlying causes of today's scarcity:

“Two dynamics are keeping existing-home inventory historically low – rate-locked existing homeowners and the fear of not finding something to buy.”

Let's dissect these two major issues in today's housing market.

Homeowners with Rate Locks
The average interest rate for current homeowners with mortgages is less than 4%, according to the Federal Housing Finance Agency (FHFA) (see graph below):

The Two Big Issues the Housing Market’s Facing Right Now | Simplifying The Market

However, the typical mortgage rate offered to buyers today is more than 6%. As a result, many homeowners are choosing to stay in their current home rather than move to a home with a higher borrowing cost. This is referred to as being rate locked.

When so many homeowners are rate locked and unwilling to sell, it creates a problem for a housing market that desperately needs more inventory. Experts predict that mortgage rates will gradually fall this year, which could mean that more people will be willing to relocate as a result.

The Fear of Not Being Able to Buy
Another factor discouraging potential sellers is the fear of not being able to find another home to buy if they move. Many people are waiting for more homes to come on the market because they are concerned about where they will live. That is why, if you are contemplating selling, you should weigh all of your options. This includes newly constructed homes, especially now when builders are offering incentives such as mortgage rate buydowns.

How Does This Affect You?
These two factors are keeping the supply of available homes for sale lower than it was before the pandemic. However, if you want to sell your home, today's market is a bargain that can work in your favor.

Work with a local real estate professional to explore your current options, which may include leveraging your current home equity. ATTOM claims that:

“. . . 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 significant difference when you relocate. Consult with a local real estate expert to learn how putting your equity to work can help you save money on your next home.

In conclusion
Rate-locked homeowners and the fear of being unable to find a suitable home are keeping housing inventory low across the country. However, as mortgage rates begin to fall this year and homeowners consider all of their options, we can expect more homes to hit the market.

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