Homebuyers Ready to Purchase, but Homeowners Aren't Selling
New York, NY, December 18, 2023-"The lowest mortgage rates since the summer are starting to lure frustrated home shoppers back to the market,” reports the Wall Street Journal. “The problem is that few homeowners who have locked in much lower rates appear ready to sell.
“Home sales this year are on track to be the lowest since at least 2011. But as mortgage rates retreated from nearly 8% in October to below 7% last week, buyers are responding. Mortgage applications have increased for six straight weeks on a seasonally adjusted basis, though they are still down from year-ago levels, according to the Mortgage Bankers Association.
“Real-estate agents say they expect more buying activity in the new year, after home shoppers return from a break over the holidays.
“‘There’s just a lot of pent-up demand,’ said Lisa Sturtevant, chief economist at Bright MLS, a real-estate listings database that covers parts of six eastern states and Washington, D.C. ‘There’s a lot of people out there who are still waiting to get into the market, and they’re making it work however they can.’
“Home-buying affordability, which hit the worst level in decades this fall, is improving. The typical housing payment for a buyer purchasing a median-priced home with a 20% down payment was $2,503 in the four weeks ended Dec. 10, the lowest level since April, according to real-estate brokerage Redfin.
“That buying appetite is poised to grow further owing to the recent retreat in mortgage rates. According to Freddie Mac, the average rate on a 30-year fixed mortgage has declined for seven straight weeks, falling to 6.95% as of Dec. 14 after hitting a two-decade high of 7.79% in October.
“The most significant constraint is the shortage of homes on the market. Many homeowners who locked in low mortgage rates in recent years are unwilling to give up those loans to take on a different mortgage at a significantly higher cost.
“After a boom in home purchases and refinancings when rates were near a bottom, more than 32 million homeowners have mortgage rates below 4%, according to Intercontinental Exchange.
“New for-sale listings are going up, but slowly. In November, they rose 7.5% from a year earlier, but the active inventory of homes for sale was almost 38% below typical prepandemic levels, according to Realtor.com.
“Homeowners’ unwillingness to sell their homes because they don’t want to let go of their low mortgage rates is keeping home prices near record highs. Mortgage rates would need to fall another percentage point or more to entice many homeowners to sell, economists and real-estate agents say.
“The current dichotomy between more buyers who see mortgage rates as attractive enough to transact and homeowners who still consider them too steep to sell is likely to keep the housing market from really taking off.
“A combination of low inventory, high prices and high mortgage rates has stifled the housing market this year. Existing-home sales slumped in October to the lowest rate since August 2010, according to the National Association of Realtors.
“In a sign of how much consumer expectations have changed, a mortgage rate near 7% is now attracting buyers, while a 7% mortgage rate in late 2022 led to a sharp drop in sales activity.”