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Pessimistic Homeowners Reluctant To Sell

Neighborhood | Image by azK2/Shutterstock
Neighborhood | Image by azK2/Shutterstock

Housing inventory in the United States is being weighed down by increasingly pessimistic homeowners stuck in favorable rates.

When interest rates are high, as they are now, they can discourage current owners from listing their property. This is because they locked in much lower mortgage rates, and by selling, they may be forced to negotiate at a much higher prevalent rate.

To make matters worse, many people expect rates to continue their ascent.

A Federal Reserve Bank of New York’s SEC Housing Survey found that most Americans expect mortgage rates to climb from current levels of around 7% to 8.7% one year from now and 9.7% in three years.

In 2021, the country’s average 30-year fixed mortgage rate was below 3%. At 3%, a $500,000 mortgage would entail a roughly $2,100 monthly payment. For comparison, that same loan value at 9.7% would require a monthly payment of nearly $4,300.

Earlier this month, The Dallas Express reported that a brief respite in rates helped spike refinancing demand, according to Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association.

“Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications,” Kan stated in an MBA news release.

While new listings in cities assessed by Redfin Corp. are up 10% compared to last year, they remain well below 2022 and 2021. As a result, the median sale price for new listings has jumped 6% compared to the previous year.

In early May, the Federal Reserve again paused rates at 5.3%. The central bank continues to look for signs that the economy is sufficiently cooling but has not been convinced so far.

Recent economic data, including better-than-expected jobless claims, have pushed traders away from betting on rate reductions starting in September. They now anticipate just one cut by the Fed this year.

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