Home Sellers Listing Properties Despite Giving Up Low Mortgage Rates

High mortgage rates force some homeowners to sell, despite low rates, as Freddie Mac forecasts modest home price growth. The Fed's rate hikes have created an affordability crisis, but experts predict gradual rate declines in 2024.

Dil Bar Irshad
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Home Sellers Listing Properties Despite Giving Up Low Mortgage Rates

Home Sellers Listing Properties Despite Giving Up Low Mortgage Rates

According to a report from The Wall Street Journal on April 22, 2024, some home sellers are listing their properties due to relocation, even though they would have to give up their low mortgage rates.

The current average mortgage rate on a 30-year fixed-rate mortgage is 7.29%, a 23 basis points jump from the previous week. Borrowers looking for a 15-year fixed mortgage face an average rate of 6.74%, an increase of 20 basis points from a week ago.

Freddie Mac's latest outlook shows that U.S. home prices are expected to increase only 0.5% in 2024 and 2025, down sharply from its previous forecast. This is due to a combination of still-limited inventory and higher-for-longer mortgage rates, which are challenging for prospective buyers, especially first-time Millennial homebuyers. The Federal Reserve's decision to keep interest rates high for as long as needed has contributed to the downgrade in Freddie Mac's housing market outlook.

Why this matters: The high rates and mortgage rates have kept many Americans away from homeownership, with the CEO of Redfin describing it as the "worst situation" for the housing market. The affordability crisis is affecting both buyers and sellers, as some homeowners feel trapped in their current homes due to the higher rates.

Empty-nesters and growing families are among those who are moving forward with their plans, even as the Federal Reserve's high-rate policies continue. In the third year of the Fed's rate hikes, some sellers and buyers are no longer waiting for the central bank to change course, as inflation remains elevated and mortgage rates have risen above 7% again.

Housing Dynamics: The housing market has stabilized in terms of price growth, with home price growth back to a similar pace as before the COVID-19 pandemic. However, the market remains vastly different, with high mortgage rates and limited inventory making homes unaffordable for many potential buyers. The level of transactions is at "recessionary lows," partly due to the mortgage rate lock-in effect, which is now loosening its grip on the market.

Mortgage Rate Forecast: Experts predict that mortgage rates will modestly decline this year as the Federal Reserve cuts interest rates, while home prices are likely to remain flat or unchanged nationally. The Fed's recent forecast of 2024 rate cuts could give home buyers hope for more affordable homes as the market continues to thaw. However, experts suggest that even if rates continue to drop, it's unlikely they'll return to their 2020 and 2021 lows of around 3% to 3.5%.

Key Takeaways

  • Mortgage rates have risen sharply, with 30-year fixed at 7.29% and 15-year at 6.74%.
  • Home price growth is expected to slow to 0.5% in 2024-2025 due to high rates and limited inventory.
  • High rates have kept many Americans from homeownership, affecting both buyers and sellers.
  • Some sellers are moving forward with plans despite the Fed's high-rate policies and inflation.
  • Experts predict modest rate declines in 2024, but unlikely to return to 2020-2021 lows.