Mortgage experts believe a decrease in rates by 1% to 2% from the current average near 7% could significantly boost housing inventory. Rates may need to fall to 5% or lower to overcome the lock-in effect and encourage homeowners to sell.

Current high mortgage rates are deterring homeowners from selling, keeping housing inventory low. Experts, including Kate Kaminski from Walton Global, indicate that a decrease to 6% or lower could motivate homeowners to sell, countering the lock-in effect from lower rates during the pandemic. Michelle White, a mortgage expert, and Brian Durham from Realty Group LLC suggest that rates need to drop even further, potentially below 5%, to trigger a significant increase in available homes. This change would help break the cycle where many are hesitant to lose their low-rate mortgages obtained during lower interest periods.

The Bottom Line

To revitalize the housing market with more available homes, a considerable reduction in mortgage rates may be necessary. Such a change would encourage homeowners, currently reluctant to give up low-interest rates from previous years, to consider entering the market as sellers.