The Two Big Issues the Housing Market’s Facing Right Now

The biggest challenge the housing market’s facing is how few homes there are for sale. Mark Fleming, Chief Economist at _First American,_ [explains](https://blog.firstam.com/economics/why-housing-market-potential-increased-for-the-second-straight-month "explains") the root causes of today’s low supply: > ###### _“Two dynamics are keeping existing-home inventory historically low – **rate-locked existing homeowners** **and** **the fear of not finding something to buy**.”_ Let’s break down these two big issues in today’s housing market. #### **Rate-Locked Homeowners** According to the _Federal Housing Finance Agency_ (FHFA), the [average interest rate](https://www.fhfa.gov/DataTools/Downloads/Pages/National-Mortgage-Database-Aggregate-Data.aspx "average interest rate") for current homeowners with mortgages is less than 4% (_see graph below_): [](https://files.mykcm.com/2023/02/16150439/average-mortgage-rate-is-less-than-4-percent-MEM.png) But today, the typical mortgage rate offered to buyers is [over 6%](https://www.freddiemac.com/pmms "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_. When so many homeowners are rate locked and reluctant to sell, it’s a challenge for a housing market that needs more inventory. However, experts project [mortgage rates](https://www.mykcm.com/2023/01/17/think-twice-before-waiting-for-3-mortgage-rates/ "mortgage rates") will gradually fall this year, and that could mean more people will be willing to move as that happens. #### **The Fear of Not Finding Something To Buy** The other factor holding back potential sellers is the fear of not finding another home to buy if they move. Worrying about where they’ll go has left many on the sidelines as they wait for more homes to come to the market. That’s why, if you’re on the fence about selling, it’s important to consider all your [options](https://www.mykcm.com/2023/01/30/where-will-you-go-if-you-sell-you-have-options/ "options"). That includes newly built homes, especially right now when builders are offering concessions like mortgage rate [buydowns](https://www.mykcm.com/2023/2/15/should-you-consider-buying-a-newly-built-home/ "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](https://www.mykcm.com/2023/2/17/the-spring-housing-market-could-be-a-sweet-spot-for-sellers-infographic "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_](https://www.attomdata.com/news/market-trends/home-sales-prices/attom-q4-2022-u-s-home-equity-and-underwater-report/ "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.”_ This could make a major difference when you move. Work with a local real estate expert to learn how putting your equity to work can keep the cost of your next home down. ### **Bottom Line** Rate-locked homeowners and the fear of not finding something to buy are keeping housing inventory low across the country. But as mortgage rates start to come down this year and homeowners explore all their options, we should expect more homes to come to the market. Posted by [Ryan Drowne](https://www.thedavidgreengroup.com/blog/author/ryandrowne/) on February 21st, 2023 Enjoy this blog post? 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