Almost 90% of U.S. homeowners have a mortgage rate below 6%, according to a report Friday from Redfin.
To be precise, 88.5% of homeowners have a rate below that threshold, down from a high of 92.8% in the second quarter of 2022, the online property portal said.
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With so many having secured rates below what is currently available, the real estate market is witnessing a phenomenon called the “lock-in effect,” where homeowners are choosing to remain where they are instead of selling and buying another home at a higher rate.
It’s also the main reason why U.S residents continue to face a drastic shortage of homes for sale.
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For most people though, “it’s not realistic to stay put forever,” the report said. Major life events, like divorce or a growing family, leave some with no choice but to move, regardless of mortgage rates.
“I’m working with a lot of homeowners who are selling because of things like divorces, new jobs or deaths in the family,” said David Palmer, a Redfin Premier real estate agent in Seattle. “I’m also working with homeowners who are bursting at the seams and selling because they’ve outgrown their current home.”
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Those kinds of movers are helping home listings to tick up compared to last year, as are gradually slipping mortgage rates. The 30-year fixed-rate mortgage stood at 6.66% as of Thursday, according to lending giant Freddie Mac. That’s down from the 20-year high of almost 8% seen in late October.
“Sellers have started coming out of the woodwork because that’s typical for January and because mortgage rates have dropped,” Palmer said. “They’re also coming to terms with the fact that rates aren’t going back down to 3% any time soon, which makes it easier to pull the trigger on selling. But a lot of sellers are worried about finding their next house because even though listings are rising, there’s still a housing shortage. That’s part of the reason so many sellers remain on the sidelines.”
