Two Big Issues the Housing Market’s Facing Right Now

In the housing market, the most pressing challenge is the lack of homes for sale. Chief Economist at First American, Mark Fleming, explains the causes of low supply today: “Two dynamics are keeping existing-home inventory historically low – rate-locked existing homeowners and the fear of not finding something to buy.” The result has been a highly competitive environment for buyers.

 Let's take a closer look at these two major housing market issues.

 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 over 6%. As a result, many homeowners are opting to stay put instead of moving to another home with a higher borrowing cost. This is a situation known as being rate locked. Homeowners who purchased their homes during historically low-interest rates are especially impacted by this dynamic.

When so many homeowners are rate locked and reluctant to sell, it’s a challenge for a housing market that needs more inventory. Consequently, fewer existing homes are available for sale, contributing to low inventory levels. However, experts predict that mortgage rates will gradually decline this year, and that could make more people willing to move.

The fear of not finding something to buy

Another key dynamic contributing to low inventory is the fear of not finding something to buy. In a low-inventory environment, it can be difficult to find a suitable home to purchase, which can make the prospect of selling and moving much more daunting. Those worried about where they'll end up have left many on the sidelines as they wait for more homes to hit the market. This dynamic is particularly prevalent among families who are looking for larger homes or homes in desirable school districts.

That’s why, if you’re on the fence about selling, consider all your buying options, including newly built homes while builders are offering concessions like mortgage rate buydowns.

What Does This Mean for You?

These two issues are keeping the supply of homes for sale lower than pre-pandemic levels. But if you want to sell your house, today’s market is a sweet spot that can work to your advantage.

Be sure to work with a local real estate professional to explore the options you have right now, which could include leveraging your current home equity. 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.”


Rate-locked homeowners and the fear of not finding something to buy are keeping housing inventory low across the country. For home buyers, these factors have made the market challenging. As mortgage rates start to decline this year and homeowners explore all their options, we should see more homes on the market.

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