Two significant factors frequently prevent homeowners from selling. They worry that they won’t be able to find anything to buy because supply is so scarce and feel trapped by the higher mortgage rates in effect today. Let’s examine each difficulty and offer you some sound guidance on how to get past these barriers.
Challenge 1: The resistance to accepting a higher mortgage rate
The Federal Housing Finance Agency (FHFA) reports that the typical interest rate for current homeowners who have mortgages is less than 4% (see graph below):
The typical 30-year fixed mortgage rate offered to buyers today, however, is closer to 7%. Due to this, a lot of homeowners are choosing to remain in their current residences rather than purchasing a home in an area with higher borrowing costs. The mortgage rate lock-in effect is present in this circumstance.
The Advice: Waiting might not be worthwhile
While experts anticipate that as inflation slows this year, mortgage rates will gradually drop as well, you shouldn’t necessarily hold off on selling. Mortgage rates are notoriously difficult to forecast. Additionally, home prices are currently returning to growth. If you make the move now, you’ll at least avoid rising home prices when you purchase your subsequent residence. Furthermore, you can always refinance later if rates decline as predicted by experts.
Challenge 2: The worry that you won’t find anything to buy
There will be fewer homes available on the market if so many homeowners are unwilling to accept a higher rate. Because of this, inventory will remain low. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):
“Inventory will remain tight in the coming months and even for the next couple of years. Some homeowners are unwilling to trade up or trade down after locking in historically-low mortgage rates in recent years.”
Even though you are aware that the lack of available housing makes your home stand out to eager buyers, you might be reluctant to sell because you don’t want to have trouble finding a new home.
The recommendation is to broaden your search
Remember to weigh all your options if the main thing stopping you is the worry that you won’t be able to find your next residence. You may have a wider range of options if you consider all housing types, including apartments, townhomes, and even newly constructed homes. Additionally, you might be able to consider areas you hadn’t previously searched if you can work fully remotely or in a hybrid environment. You may find more affordable options if you search outside of your place of employment.
