Are More Homeowners Selling as Mortgage Rates Come Down?

<article class="post-917362 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-917362"><span class="entry-date">January 24, 2024</span><div class="entry-header center-block text-center"><h1 class="entry-title">Are More Homeowners Selling as Mortgage Rates Come Down?</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Are+More+Homeowners+Selling+as+Mortgage+Rates+Come+Down%3F&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fare-more-homeowners-selling-as-mortgage-rates-come-down%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Are More Homeowners Selling as Mortgage Rates Come Down? Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20240124-Are-more-homeowners-selling-as-mortgage-rates-come-down.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width="358"/>
<p>If you’re looking to <a href="https://www.simplifyingthemarket.com/2024/01/05/achieving-your-homebuying-dreams-in-2024-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">buy a home</a>, the recent downward trend in <a href="https://www.simplifyingthemarket.com/2024/01/08/what-lower-mortgage-rates-mean-for-your-purchasing-power/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a> is good news because it helps with affordability. But there’s another way this benefits you – it may inspire more homeowners to put their houses up for sale.</p>
<h4><strong>The Mortgage Rate Lock-In Effect</strong></h4>
<p>Over the past year, one factor that’s really limited the options for your move is how few homes were on the market. That’s because many homeowners chose to delay their plans to sell once mortgage rates went up. An article from <em>Freddie Mac </em><a href="https://www.freddiemac.com/research/forecast/20231220-us-economy-expanded-in-2023" rel="noopener noreferrer" target="_blank">explains</a>:</p>
<blockquote><p><em>“</em><strong><em>The lack of housing supply was partly driven by the rate lock-in effect</em></strong><em>. . . . 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.”</em></p></blockquote>
<p>These homeowners decided to stay put and keep their current lower mortgage rate, rather than move and take on a higher one on their next home.</p>
<h4><strong>Early Signs Show Those Homeowners Are Ready To Move Again</strong></h4>
<p>According to the <a href="https://www.realtor.com/research/data/" rel="noopener noreferrer" target="_blank">latest data</a> from <em>Realtor.com</em>, there were more homeowners putting their houses up for sale, known in the industry as <strong><em>new listings</em></strong>, in December 2023 compared to December 2022 (<em>see graph below</em>):</p>
<p> <a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240117/20240124-Sellers-Are-Re-entering-the-market.png" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20240117/20240124-Sellers-Are-Re-entering-the-market.png"/></a></p>
<p></p>
<p>Here’s why this is so significant. Typically, activity in the <a href="https://www.simplifyingthemarket.com/2024/01/03/thinking-about-buying-a-home-ask-yourself-these-questions/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">housing market</a> cools down in the later months of the year as some sellers choose to delay their moves until January rolls around.</p>
<p><strong>This is the first time since 2020 that we’re seen an uptick in new listings this time of year.</strong> This could be a signal that the rate lock-in effect is easing a bit in response to <a href="https://www.simplifyingthemarket.com/2023/12/20/why-mortgage-rates-could-continue-to-decline/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">lower rates</a>.</p>
<h4><strong>What This Means for You</strong></h4>
<p>While there isn’t going to suddenly be an influx of options for your <a href="https://www.simplifyingthemarket.com/2023/11/21/are-there-actually-more-homes-for-sale-right-now/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home search</a>, it does mean more sellers may be deciding to list. According to a <a href="https://www.jchs.harvard.edu/blog/homeowner-mobility-stalls-amid-rising-interest-rates" rel="noopener noreferrer" target="_blank">recent article</a> from the <em>Joint Center for Housing Studies</em> (JCHS):</p>
<blockquote><p><em>“</em><strong><em>A reduction in interest rates could alleviate the lock-in effect</em></strong><em> and help lift homeowner mobility. Indeed, interest rates have recently declined, falling by a full percentage point from October to November 2023 . . . </em><strong><em>Further decreases would reduce the barrier to moving and give homeowners looking to sell a newfound sense of urgency</em></strong><em> . . .”</em></p></blockquote>
<p>And that means you may see more homes come onto the market to give you more <a href="https://www.simplifyingthemarket.com/2023/12/11/the-perfect-home-could-be-the-one-you-perfect-after-buying/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">fresh options</a> to choose from.</p>
<h3>Bottom Line</h3>
<p>As mortgage rates come down, more sellers may re-enter the market – that gives you an opportunity to find the home you’re looking for. Connect with a <a href="https://www.simplifyingthemarket.com/2023/12/07/why-you-need-to-use-a-real-estate-agent-when-you-buy-a-home/" rel="noopener noreferrer" target="_blank">real estate agent</a> so you’ve got a local expert on your side who’ll help you stay on top of the latest listings in our area.</p>
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