Two Big Issues Affecting the Housing Market Right Now

Young couple working on computer while calculating finances sitting on couch
Feb 21, 2023 10:44 AM

by: Nick Barta, Loan Originator, Security First Financial

The biggest challenge the housing market’s facing is how few homes there are for sale. Mark Fleming, Chief Economist at First American, 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 for current homeowners with mortgages is less than 4% (see graph below):



But today, the typical mortgage rate offered to buyers is 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 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. That includes newly built homes, especially right now when builders are offering concessions like mortgage rate 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 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:


“. . . 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.



The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Primary Residential Mortgage, Inc and Keeping Current Matters, Inc. do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Primary Residential Mortgage, Inc and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.


Fleming, Mark. “Why Housing Market Potential Increased for the Second Straight Month.” First American, 20 Jan. 2023, blog.firstam.com/economics/why-housing-market-potential-increased-for-the-second-straight-month.

“National Mortgage Database (NMDB) Aggregate Statistics.” Federal Housing Finance Agency, 5 Jan. 2023, www.fhfa.gov/DataTools/Downloads/Pages/National-Mortgage-Database-Aggregate-Data.aspx.

“Mortgage Rates: Mortgage Rates Increase for the Second Consecutive Week.” Freddie Mac, 16 Feb. 2023, www.freddiemac.com/pmms.

ATTOM. “Home Equity Flattens Out Across U.S. in Fourth Quarter of 2022.” ATTOM, 2 Feb. 2023, www.attomdata.com/news/market-trends/home-sales-prices/attom-q4-2022-u-s-home-equity-and-underwater-report.

Get Started Today

*Required fields
Please Read ▼
*Opinions expressed are solely my own and do not express the views of my employer.