The biggest challenge facing the housing market is the lack of homes for sale. Mark Fleming, Chief Economist at First American, explains the root cause of the current 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 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):
But today, the typical mortgage rate offered to buyers is more than 6%. As a result, many homeowners choose to stay in instead of moving to another home with higher loan costs. This is a situation known as locked rates.
When so many owners are locked in and don’t want to sell, it’s a challenge for a housing market that needs more inventory. However, experts predict that mortgage rates will gradually decline this year, which means more people will be willing to move out when this happens.
The Fear of Not Finding Something To Buy
Another factor holding back potential sellers is the fear of not finding another home to buy if they move. Worrying about where they’re going has left many on the sidelines waiting for more homes to hit the market. That’s why, if you’re hesitant to sell, it’s important to consider all of your options. This includes newly built homes, especially right now when builders are offering concessions like mortgage rate buybacks.
What Does This Mean for You?
Both of these issues are keeping the supply of homes for sale below pre-pandemic levels. But if you want to sell your home, today’s market is a great place that can benefit you.
Be sure to work with a local real estate professional to explore the options you currently have, which may include maximizing the equity in your existing property. 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.
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APRIL 6, 2023 | Your Home Sold Guaranteed Las Vegas
