The budding recovery in for-sale home inventory is continuing to build momentum, according to a new Existing Home Sales Outlook Report from First American Financial Corp.
The bad news, according to the report, is that the lock-in effect largely remains in place, with 87% of mortgaged homes, per numbers from the Federal Housing Finance Agency, having an interest rate below 6% — far below mortgage rates which remain above 7% after eclipsing that threshold in April. That represents a slight moderation from when mortgage rates hit their peak in October last year, but still remains a sizeable impediment not only to home sales but to home inventory.
The good news, however, is that despite the persistent stickiness of the lock-in effect, more homeowners are choosing to list their homes compared to one year ago. Citing Zillow data, First American deputy chief economist noted that new listings in April are up 16% annually.
That’s still 22% below the average count of new April listings from 2018 to 2022 (excluding the pandemic-ravaged month of April 2020), but Kushi called the progress “a welcome development.”
“Higher inventory levels offer more choices for buyers and potential sellers alike, boosting market activity as participants find more options suited to their needs,” Kushi said.
Sellers, according to Kushi, have “un-anchored their expectations” from mortgage rates hit near-historic lows during the pandemic-era housing boom. The record-high levels of home equity being earned by homeowners could also be cushioning the blow from the lock-in effect; for an equity-rich homeowner, taking on a higher interest rate may simply not be as big of a deal, particularly if they’re downsizing of moving to a more affordable market.
More inventory typically prompts more sales, which First American has taken into consideration when calculating its forecast for April’s existing home sales figures, due to be released later this month. The company expects resales to rise 0.7% from March, while on a seasonally adjusted annual basis, April existing home sales are projected to be down 12% compared to the predicted pace of sales one year ago.
