Are More Homeowners Selling as Mortgage Rates Come Down?

January 24, 2024

The Mortgage Rate Lock-In Effect

If you’re looking to buy a home, the recent downward trend in mortgage rates is good news because it helps with affordability. But there’s another way this benefits you – it may inspire more homeowners to put their houses up for sale.


Over the past year, one factor that’s really limited the options for your move is how few homes were on the market. That’s because many homeowners chose to delay their plans to sell once mortgage rates went up. An article from Freddie Mac explains:

“The lack of housing supply was partly driven by the rate lock-in effect. . . . With higher rates, the incentive for existing homeowners to list their property and move to a new house has greatly diminished, leaving them rate locked.”

These homeowners decided to stay put and keep their current lower mortgage rate, rather than move and take on a higher one on their next home.


Early Signs Show Those Homeowners Are Ready To Move Again

According to the latest data from Realtor.com, there were more homeowners putting their houses up for sale, known in the industry as new listings, in December 2023 compared to December 2022 (see graph below):

 


Here's why this is so significant. Typically, activity in the housing market cools down in the later months of the year as some sellers choose to delay their moves until January rolls around.

This is the first time since 2020 that we’re seen an uptick in new listings this time of year. This could be a signal that the rate lock-in effect is easing a bit in response to lower rates.


What This Means for You

While there isn’t going to suddenly be an influx of options for your home search, it does mean more sellers may be deciding to list. According to a recent article from the Joint Center for Housing Studies (JCHS):

“A reduction in interest rates could alleviate the lock-in effect and help lift homeowner mobility. Indeed, interest rates have recently declined, falling by a full percentage point from October to November 2023 . . . Further decreases would reduce the barrier to moving and give homeowners looking to sell a newfound sense of urgency . . .”

And that means you may see more homes come onto the market to give you more fresh options to choose from.


Bottom Line

As mortgage rates come down, more sellers may re-enter the market – that gives you an opportunity to find the home you’re looking for. Let’s connect so you’ve got a local expert on your side who’ll help you stay on top of the latest listings in our area.


The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Evan Fitzgerald or @properties does 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. Evan Fitzgerald or @properties will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.



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Are Investors Actually Buying Up All The Homes?

By evanfitzgerald • March 11, 2025
Are you trying to buy a home but you feel like you’re up against deep-pocketed Wall Street investors snatching up everything in sight? Many people believe mega investors are driving up prices and buying up all the homes for sale, and that’s making it hard for regular buyers like you to compete. But here’s the truth. Investor purchases are actually on the decline, and the big players aren’t nearly as active as you might think. Let’s dive into the facts and put this myth to rest. Most Investors Are Small, Not Mega Investors A common misconception is that massive institutional investors are dominating the market. In reality, that’s not the case. The Mortgage Reports explains: “On average, small investors account for around 18% of the market, while mega investors represent only about 1%. ” Most real estate investors are mom-and-pop investors who own just a few properties — not large corporations buying up entire neighborhoods. They’re people like your neighbors who have another home they’re renting out or a vacation getaway. Investor Home Purchases Are Dropping But what about the big investors you hear about in the news? Lately, those institutional investors – the ones that make headlines – have pulled back and aren’t buying as many homes. According to John Burns Research and Consulting (JBREC), at their all-time peak in Q2 2022, institutional investors (those owning 1,000+ single-family homes) only made up 2.4% of home sales. And that number has only come down since then. By Q3 2024, that number had fallen to just 0.3% (see graph below): That’s a major shift, and it means far fewer investors are competing in the market now than just a few years ago. Investors are clearly more reluctant to buy in today’s market, but why? The answer is largely because higher mortgage rates and home prices have made it less attractive for them. The idea that Wall Street investors are buying up all the homes and making it impossible for you to compete is a myth. While some investors are still in the market, they’re not nearly as active as they were in past years. Bottom Line  Big institutional investors aren’t buying up all the homes – if anything they’re buying less than they have been. Let’s connect and talk about what’s happening in our local market. There could be more opportunities than you think. How does knowing investors are buying fewer homes change the way you see your chances in today’s market?

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