Throughout the second half of 2020 and all throughout 2021, we saw both demand and prices for homes skyrocket. Of course, a major catalyst for this was due to the pandemic and the push from many Americans looking to move out of the big cities and into the suburbs. In many cases, this also meant moving to entirely new cities and states as the virtual workspace became even more popular. With all of this said, a major driver for the housing demand during this time was also ultra low mortgage rates. Needless to say, these low mortgage rates greatly impacted the buying power for home buyers. Fast forward to early 2022 and the nation was battling out-of-control inflation which led to what has now been a steady rise in mortgage rates.
More homeowners are handcuffed to their mortgage rates
According to a recent survey from Realtor.com®, of homeowners looking to sell within the next 12 months, 86% are planning to buy a new home, but 82% of these seller-buyers feel “locked in” by their currently low mortgage rate. Needless to say, many would-be sellers are feeling a reluctance to sell due to the low mortgage rate that they may have locked in. When interest rates were at historic lows, many homeowners refinanced their mortgages to take advantage of the savings. As a result, they are now paying much less on their monthly mortgage payments than they would if they had to refinance today.
When looking at a difference of a few percentage points on a mortgage, this difference can result in a significant difference in your monthly payment. Below is an example for a $300,000 mortgage:
|Loan Amount||Loan Term||Interest Rate||Monthly Payment|
In closing, given the high percentage of homeowners that either purchased a home or refinanced a home during the historically low interest rate period throughout the pandemic, it is largely expected that inventory constraints will persist. Although more new home construction may be able to alleviate some of these constraints, it is likely that we will not see significant relief unless mortgage rates pull back to some extent. With this said, it is still important for sellers to have realistic expectations when pricing their homes for sale.
Are you thinking about selling your home in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your smartphone or tablet!