Years Of Low Mortgage Rates Have Made Homeowners Reluctant To Sell Their Home

As the housing market cools, more homeowners are delaying their sales, causing the biggest drop in active property listings in more than two years. Due in part to a slowdown in homebuyer demand brought on by higher mortgage rates, homeowners are choosing to stay put.

  • According to real-estate brokerage Redfin Corp, the number of newly listed residences decreased by 19% over the previous year in the four weeks that ended on September 11
  • Some homeowners are also exhibiting a phenomenon known as "rate lock in", where they are reluctant to purchase a new residence since doing so would entail paying a mortgage rate that is much higher

“You’ve got existing homeowners who are sitting on these rock-bottom rates, and what is their financial incentive to move and lock into a rate that’s potentially as much as 3 percentage points higher than what they’ve locked into?” Odeta Kushi, deputy chief economist at First American Financial Corp.

Overall Home Supply Still Up Year-On-Year As Buyers Are Getting Scarce Too

Housing supply is still growing despite the drop in new listings as purchasers are cooling off more than home sellers. There are 4% more houses available for purchase overall than last year implying that the housing shortage is decreasing, a good news for purchasers who can afford to stay in the market.

“Buyers are backing off due to rising housing costs and sellers are holding back because they realize they won’t get the bidding war they would have gotten six months ago [...]. The good news is this is bringing balance to the market. If mortgage rates resume their downward trajectory, more buyers and sellers could get back in the game.” Taylor Marr, Deputy Chief Economist at Redfin

  • Nevertheless, despite seven straight months of dropping sales as interest rates have practically doubled since the year's beginning, housing inventories remain low and home prices are close to record highs

Housing Affordability At Its Lowest Level In 40 Years

According to data from Black Knight, based on last week's rates, payments on a median-priced US home demand 36% of household income, the highest level since 1985. When rates were roughly half as high as they are now, in September 2021, monthly payments accounted for 22% of the median household income.

  • According to Freddie Mac, the average interest rate for a 30-year fixed loan has increased to 6.29%, with no signs of slowing down

In locations where affordability has deteriorated the most, the market is cooling off the fastest.

  • California has experienced among of the largest decreases in property prices, with only 16% of households there able to purchase at the end of the second quarter
  • San Francisco and Los Angeles lead the country with a 3.4% decrease in housing prices from the prior month in August
  • Prices dropped 0.3% nationwide from July, the biggest in 11 years


Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.


Photo by Dillon Kydd on Unsplash