If you’re in the market for a new house, the recent decline in mortgage rates is good news, as it provides more buying power. Another advantage of this trend is that it could encourage a greater number of homeowners to list their properties for sale, providing you with more opportunities to find the perfect home.
The Impact of Mortgage Rate Fluctuations
In the last year, one of the biggest barriers to finding a new home has been the limited number of properties available. This shortage has been largely due to many homeowners postponing their selling plans when mortgage rates increased. Freddie Mac spoke about this, stating:
“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.”
Because of this, many homeowners opted to stay where they were, understandably preferring their existing lower mortgage rates over the idea of higher rates for a new home.
Recent Indicators Suggest a Shift in Homeowner Sentiment
Recent statistics from Realtor.com indicate a rise in homeowners listing their properties on the market in December 2023 compared to the same period of time in 2022.
This is especially noteworthy because the housing market usually slows down towards the end of the year, with sellers often waiting until January to make their next move.
For the very first time since 2020, there’s been an increase in new listings during this season, which might just hint that the impact of the rate lock-in effect is lessening—likely in reaction to falling mortgage rates.
What This Means for Buyers
While this doesn’t automatically imply a sudden surge in properties, it does suggest that more sellers might be considering listing their homes. The Joint Center for Housing Studies (JCHS) shared:
“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”
This could lead to a higher number of homes entering the market, giving potential buyers a much wider pool of options.
About Julie Krumholz from Superior National Bank
Ready to start the homebuying process for 2024? Julie Krumholz from Superior National Bank can help.
With over 30 years of experience, Julie Krumholz is no stranger to shifting housing markets. She’s experienced nearly every facet of the mortgage industry, from processing, closing, loan origination, underwriting, QC auditing, and even co-owning a mortgage brokerage firm. Julie uses her wealth of experience to match homebuyers with the best mortgage program for their needs and helps streamline the mortgage process.
