Mortgage Rates Are Rising, But Some Homeowners Are Staying Behind the Curve

Just over half (51%) of all U.S. homeowners with mortgages have rates below 4%, while 32% of homeowners (including those without mortgages) have a mortgage rate even lower than 4% despite consistent gains on the average 30-year fixed-rate mortgage, Redfin reports. Homeowners still holding onto historically low rates are incentivized to stay put rather than selling their current homes and increasing their monthly housing bill, and this trend may have a measurable impact on housing supply.

During the four weeks ending April 10, new listings dropped 7% year-over-year compared to a 1% decline at the end of February, when rates were still relatively low. Though buyer demand isn’t waning, prospective sellers are opting to keep their homes off of the market to hold onto ultra-low rates.

“Higher mortgage rates may already be putting a damper on home listings, but they’re also curbing the insatiable homebuyer demand for those listings,” Redfin Deputy Chief Economist Taylor Marr said. “That slowdown in demand may cause homes to stay on the market longer, in effect giving buyers more options to choose from. Overall, that could mean housing inventory actually gets better, not worse.”

There are already early signs that demand is starting to back off. Home sellers are increasingly cutting their list prices to find buyers, and Redfin has seen a drop in buyers requesting service from its agents in pricey coastal markets. Mortgage purchase applications fell 6% year over year during the week ending April 8, and home-touring activity is below last year’s levels.

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