The Housing Market Is Facing Two Headwinds

“Two dynamics are keeping existing-home inventory historically low – rate-locked existing homeowners and the fear of not finding something to buy.”

Why Move With Rates Like These?

Let's dig in to these two headwinds impacting the housing market.

The first factor contributing to the low inventory of homes is the large number of rate-locked homeowners. While the average interest rate for current homeowners with mortgages is less than 4%, the typical mortgage rate for potential buyers is over 6%.

As a result, many homeowners are choosing to stay in their current homes and avoid the higher borrowing costs associated with moving to a new property. This situation is commonly referred to as being “rate locked”. Unfortunately, when there are so many homeowners that are rate-locked and hesitant to sell, it creates a challenge for a housing market that is in dire need of more inventory.

The good news is that mortgage rates are expected to gradually fall this year, which may encourage more people to consider moving.

If Not Here, Then Where?

The second factor hindering potential sellers is the fear of not being able to find another home to purchase. Many homeowners are hesitant to put their homes on the market because they worry they won’t be able to find another suitable property to buy. This fear is keeping a lot of people on the sidelines as they wait for more homes to come to market. However, there are alternatives that sellers can consider, including newly-built homes, especially at a time when builders are offering concessions like mortgage rate buydowns.

Implications For You

While these two factors are contributing to the shortage of homes for sale, it’s important to remember that this can actually work to the advantage of sellers in today’s market.

If you’re considering selling your Maine property, working with a local real estate professional can help you explore all your options. Additionally, leveraging your current home equity could be a smart move, especially considering that nearly half of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter of 2022, according to ATTOM.

This means that the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market values.

In summary, rate-locked homeowners and the fear of not finding something to buy are keeping housing inventory low across the country, including in Maine. However, as mortgage rates begin to come down this year and homeowners explore all their options, it’s expected that more homes will come to market. If you’re considering selling, this could be an opportune time to take advantage of the current market conditions.