Are More Homeowners Selling as Mortgage Rates Come Down?
If you're in the market to purchase a home, the recent decline in mortgage rates is favorable as it contributes to affordability. Additionally, this trend could prompt more homeowners to list their properties for sale, offering you increased options and opportunities.
The Mortgage Rate Lock-In Effect
In the past year, a significant factor constraining your relocation options has been the scarcity of homes available on the market. This shortage occurred as numerous homeowners opted to postpone their selling plans in response to rising mortgage rates. Freddie Mac's article elaborates on this phenomenon.
“The lack of housing supply was partly driven by the rate lock-in effect. . . . With higher rates, the incentive for existing homeowners to list their property and move to a new house has greatly diminished, leaving them rate locked.”
These homeowners opted to remain in their current residences, preserving their existing lower mortgage rates, rather than relocate and potentially acquire a higher rate for their next property.
Early Signs Show Those Homeowners Are Ready To Move Again
According to the most recent data from Realtor.com, there was an increase in the number of homeowners listing their properties for sale, referred to as new listings, in December 2023 compared to December 2022 (see graph below):
This holds significant importance for several reasons. Generally, the housing market experiences a slowdown in activity during the latter months of the year, as certain sellers opt to postpone their moves until January.
This marks the first occurrence of an increase in new listings during this time of year since 2020. It could indicate a potential easing of the rate lock-in effect in response to the lower rates.
What This Means for You
Although there won't be a sudden surge in available options for your home search, it does suggest that more sellers may be opting to list their properties. As stated in a recent article from the Joint Center for Housing Studies (JCHS):
“A reduction in interest rates could alleviate the lock-in effect and help lift homeowner mobility. Indeed, interest rates have recently declined, falling by a full percentage point from October to November 2023 . . . Further decreases would reduce the barrier to moving and give homeowners looking to sell a newfound sense of urgency . . .”
As a result, you might notice an increase in the number of homes entering the market, providing you with a wider array of fresh options to consider.
Bottom Line
As mortgage rates decline, there's a possibility that more sellers will re-enter the market. This presents you with an opportunity to discover the home you're searching for. When you’re ready to get the process started, let’s connect.
