As landlords stay put, U.S. housing inventory remains lackluster

  • Nine out of ten US mortgages carry an interest rate below 5%, according to data from Black Knight.
  • Mortgage rates are rising, which could mean fewer existing homeowners will sell and re-enter the market.
  • Without these additional homes on the market, the US housing bubble could continue to grow.

The current owners have a big financial reason to stay put – and that could make the housing shortage in the United States even worse.

Nine out of 10 US mortgages currently carry an interest rate below 5%, according to technology and data provider Black Knight. Almost two decades ago, the typical mortgage loan trend around 6%which means that many owners today have locked in relatively affordable rates.

However, for those who have not yet purchased, home ownership becomes more and more expensive. As house prices soar and mortgage rates climbmany existing homeowners may be deterred from putting their homes up for sale and re-entering today’s real estate market.

“This combination of accelerated growth and sharply rising interest rates has resulted in the tightest affordability in 15 years,” the Black Knight researchers said. wrote.

Although low mortgage rates have attracted million americans to buy homes over the past two years, rates are now on the rise – and that’s bad news for potential buyers. As accessibility plummets low of the decade, existing homeowners are hesitant to sell their homes and list properties for sale. With fewer homes on the market, potential buyers are unlikely to see home prices plummet anytime soon – and that could mean the US housing bubble is just getting started.

Homeowners could stay put as real estate market gets more expensive

The pandemic has ushered in a period of relatively low mortgage rates, but they are starting to change course.

According to Fannie Mae, 92% of homeowners say their current home is affordable. However, the general population – homeowners and non-homeowners alike – don’t think so favorably, as Fannie’s data shows that 69% of Americans think it’s getting too hard to find affordable housing.

“Landlords and renters have significantly increased the perception that housing has become less affordable and hard to find in their area,” the Fannie researchers wrote.

In February, mortgage rates hit their highest level since the start of the pandemic and have been rising ever since. According to Freddie Mac, the average US fixed rate for a 30-year mortgage rose to 5% for the week ending April 14, 2022, eclipsing a pandemic low of 2.68% in December 2020.

George Ratiu, chief economist at Realtor.com, says the sharp rise in mortgage rates means the real estate market has reached a turning point. According to him, although 2022 has started on a solid footing, rising rates and lackluster housing stock have pushed housing affordability to new lows.

“The shortage of inventory pushed prices to record highs even before the start of the spring season,” Ratiu said in a statement. “At current rates, buyers of a median-priced home are looking at monthly mortgage payments that are $460 higher than a year ago, a 38% increase from April 2021.”

While a slight rise in mortgage rates may not seem too damaging, it could add up. Homeowners weary of an already expensive real estate market may choose to let this real estate cycle pass. Without their additional housing inventory, the US housing bubble could be doomed to continue growing.

“For many American families, today’s mortgage rates are preventing them from being able to buy a home this spring,” Ratiu said.