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After Years of Low Mortgage Rates, Home Sellers Are Scarce

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Homeowners with low mortgage rates are hesitant about the possibility of selling their homes and borrowing for their next home at a much higher rate.

Home inventories have risen from record lows earlier this year as more homes have been on the market for longer. But the number of newly listed homes in his four weeks to Sept. 11 fell 19% year-over-year, according to real estate agents.

redfin Ltd.

Economists say this shows that sellers who have no need to sell are sitting on the sidelines.

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Larry and Corina Lewis of Tarrytown, New York, have two children and expect to need a larger home in the next few years. But the current interest rate on her 30-year mortgage is 2.75% for him.

“The idea of ​​giving up this to pay double interest is a nauseating thought to me,” Lewis said. Even if average mortgage rates were to fall from their current levels, “I don’t think they’re going to be that low yet,” he said.

Larry and Corina Lewis of Tarrytown, NY have two children and expect to need a larger home in the next few years.


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Lewis family

Some homeowners constantly have to sell because of a job transfer, divorce, death, or other life event. However, if people with the option not to move decide to stay, even if demand is low, the inventory of homes for sale will fall below normal levels and home prices will rise. may continue.

A shortage of housing inventory is one of the main reasons. Home prices remain near record highsapart from 7 consecutive months of sales decline Interest rates have nearly doubled since the beginning of the year.

“I call it the ‘golden handcuffs’ of mortgage rates,” said Odeta Kushi, deputy chief economist at First American Financial. Is there a financial incentive to move and lock to a rate that could be 3 percentage points higher than the rate they locked?”

In recent years, when the Federal Reserve kept short-term interest rates low, millions of Americans had historically low interest rates. According to mortgage data provider Black Knight Inc, as of July 31, nearly 9 out of 10 top-tier mortgages had an interest rate of less than 5%, and more than two-thirds had an interest rate of less than 5%. was less than 4%. About 83% of these mortgages, according to Black Knight,

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The Fed reversed course and started raising interest rates in March to keep inflation in check. These rate hikes have spilled over into the mortgage market, including another three-quarters percentage point on Wednesday. The average interest rate for 30-year fixed-rate mortgages was 6.02% in the week ending Sept. 15, up from 2.86% a year earlier, according to mortgage lender Freddie Mac.

Alyssa and Brandon McDuffie reached out to a realtor this summer to consider selling the Raleigh, North Carolina home they purchased in 2018. Her agent said it could sell for at least $200,000 more than her $312,000 payment. The couple are reluctant to give up their 3.375% mortgage rate, so they decided to hold off until at least next year.

Alyssa and Brandon McDuffie reached out to a real estate agent this summer to consider selling the Raleigh, North Carolina home they purchased in 2018.


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Alyssa McDuffie

“At a time when home prices are rising like this, you can make a lot of money selling your home, but you’re eating up those profits with another home you buy at a higher interest rate,” McDuffie said. Said.

Redfin analyzed four major metropolitan areas: Atlanta, Chicago, Los Angeles, and Washington, D.C., and found that homeowners with mortgage rates below 3.5% were more likely to lose their homes in August than those with higher mortgage rates. found that homes are less likely to be put up for sale in

Economists say it’s hard to predict how much higher mortgage rates will reduce home listings. The National Association of Realtors estimates that when mortgage rates rose in 2018, he said existing home inventory fell 12% more than it would otherwise.

NAR Chief Economist Lawrence Yun said, “We don’t see any increase in inventories at all. The NAR’s measurement of homes under contract shows that the supply of homes for sale at the end of August was down slightly from July. did.

Sam Cater, chief economist at Freddie Mac, said in an analysis of past periods of rising interest rates in 2016, buyers’ previous mortgage rates were more than 2 percentage points lower than new mortgage rates, leading to a decline in sales. However, when the rate difference was less than 2 percentage points, there was no change.

Economists have long said that renting and investing in the stock market is a better investment than owning a home, and that could be especially true in 2022. The WSJ’s Dion Rabouin said: is explained.Photo illustration: Elizabeth Smerov

Many sellers today have significant assets in their current homes. This allows you to pay a large down payment on new purchases to offset the impact of rising interest rates. People moving from high-cost markets to low-cost regions may be less sensitive to rising interest rates, Carter said.

Still, about a third of nearly 1,000 homeowners surveyed in July by John Burns Real Estate Consulting said rising interest rates have made them feel trapped in their current homes.

Of the 197 homeowners who said they were saving for a home, only 15% said they would accept a new mortgage rate of 6% or higher.

Craig Young and Kathryn Cataldo had hoped to sell their Huntsville, Alabama home this summer, but postponed their plans in response to a market slowdown.

“I feel like I’ve missed the sweet spot of being able to sell the house,” said Young, 64. He said they need to navigate as they get older.

“If [mortgage rates] Keep going up, I’m going to hang on,” he said.

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