As high mortgage rates make homebuying increasingly unaffordable, current homeowners with rates above 5% are nearly twice as likely to sell their homes than those with lower rates.
With 90% of mortgage holders currently locked into sub-6% rates, most homeowners would need to remortgage their new home at a higher rate to buy a new house. As a result, existing-home sales are stagnating and Americans report feeling trapped by their finances.
A new analysis from Zillow found that the threshold rate for buying and selling appears to be 5%. Homeowners with rates under 5% are very unlikely to say they plan to sell their home in the next three years, while those above that mark take the opposite stance.
The divide is stark between homeowners with rates between 4% and 4.9% and with rates between 5% and 5.9%. More than 40% of the latter group would consider selling, while only 26% of the former would.
Among those who planned to sell, 47% already have their houses listed as “for sale.”
Zillow analysts chalk this up to their having less to lose by selling while rates are high.
Zillow noted that homeowners may be paying close attention to mortgage rate trends, with homeowners moving less frequently when rates are on the rise, and vice versa. The company said it will continue tracking this pattern to see if it holds.
Price declines have reversed course, with much of the country seeing gains in the past few months thanks to stock shortages. The median existing-home sales price for June jumped to $410,200.
As a result, buying a home has become a pipe dream for many Americans. Starter homes in particular have dwindled, pushing first-time buyers to the sidelines.
“There are simply not enough homes for sale,” Lawrence Yun, chief economist for the National Association of Realtors, noted. “The market can easily absorb a doubling of inventory.”
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