Business
Pandemic-Era Homeowners Cling to Low Interest Rates, Fueling Housing Shortage
By Mara Lafontaine · July 22, 2023
In brief…
- Housing sales are down some 20% from last year due to high mortgage rates and low inventory.
- Lawrence Yun, Chief Economist at the National Association of Realtors, believes the housing recession is likely ending as mortgage rates stabilize and even decline.
- The number of homes for sale has fallen by half since pre-pandemic 2019.
- The shortage is partly due to homeowners who bought or refinanced at low interest rates and are unwilling to sell their homes.
- Yun foresees mortgage rates possibly dropping to 4.5%.
The housing market is in a slump, with sales down roughly 20% from last year. “That’s just simply due to the fact that mortgage rates are high,” Dr. Lawrence Yun, Chief Economist at the National Association of Realtors, told Fox News. It’s a financial reality that leaves many potential homebuyers priced out of the market. Even so, said Yun, “Just because the housing market has the worst slump does not mean it’s easy to buy a home.”
Aspiring homebuyers still face intense competition due to an acute housing shortage. “[In] 2019, we had a housing shortage.” Yun said. “Today we have an intense housing shortage. In 2019, realtors were indicating that if they had more inventory, they could get more sales done. Guess what? Today we are at half of the inventory of 2019.”
The housing shortage is partly a result of the extremely favorable buying conditions during the pandemic, said Yun, adding, “What’s happening is that the homeowners who purchase at low interest rates, or people who refinance into those low interest rates, they don’t want to give it up… People do not want to give up that low interest rate, and that is why inventory levels are very low. Good thing that home builders are becoming very active. They are putting [out] more homes, but it takes time to get that inventory onto the market.”
Assessing the current marketplace, Yun said, “With the mortgage rate now stabilizing, or possibly even declining, we know that the Fed will be raising interest rates next week, but the mortgage market [has] already priced that information. It’s possible… the mortgage rate could decline in the remaining part of the year. Even a small decline will bring more buyers to the market… The housing recession is essentially ending or will soon be ending, and we are in the process of home sales recovery.”
As for whether we’ll see mortgage rates as low as they were a year and a half ago, Dr. Yun said, “The low point could be 4.5% down the road, maybe a couple of years from now, possibly. But 3%? Not in my lifetime.”