How Lower Mortgage Rates Could Unlock More Inventory
Higher mortgage rates have been a major factor for homebuyers in recent years, where even a small increase in rates could significantly impact their monthly mortgage payments. However, the current housing market has taken a favorable turn with the steady decrease in mortgage rates. This has not only sparked a renewed interest in homebuying but has also brought about an unexpected benefit – more inventory to choose from. In this article, we’ll explore how lower mortgage rates could unlock more inventory and what it means for buyers and sellers alike.
The Impact of Lower Mortgage Rates
The Federal Reserve has been gradually increasing interest rates since 2015, making borrowing more expensive for homebuyers. This led to a slowdown in the housing market, with many potential buyers holding off on purchasing a home until rates dropped. Fortunately, lower mortgage rates have now become the norm, and this has had a significant impact on the housing market.
According to Freddie Mac, the average 30-year fixed-rate mortgage fell to 4.06% in March 2019, marking the first time it has dropped below 4% since January 2018. The lower rates have made it more affordable for potential buyers to enter the market, and this has resulted in an increase in home sales. In addition, homeowners looking to refinance their mortgages have also benefited from the lower rates, helping them to save money on their monthly payments and potentially freeing up more funds to invest in other areas, such as buying a new home.
The Link Between Lower Rates and Increased Inventory
One of the consequences of the higher mortgage rates in recent years was the decrease in the number of homes for sale. Homeowners were reluctant to sell, as they would have to buy a new home at a higher mortgage rate, ultimately increasing their monthly expenses. This led to a tight housing inventory, with fewer options for buyers to choose from.
However, lower mortgage rates have now made it more attractive for homeowners to sell their property. With the potential to secure a lower mortgage rate on their next home, homeowners are more willing to list their homes for sale. This has resulted in an increase in housing inventory, giving buyers more options and making the market more competitive.
The Benefits for Buyers and Sellers
The increase in housing inventory is beneficial for both buyers and sellers. For buyers, the larger selection of homes means they have more chances to find the perfect property that meets their needs and budget. It also puts buyers in a better position to negotiate a lower price, as sellers are competing with each other to attract potential buyers.
On the other hand, sellers now have a better chance of getting the best price for their property. With more potential buyers in the market, sellers can confidently list their homes at a higher price, knowing that there are more buyers willing to pay that amount. In addition, the increased competition among buyers means sellers can sell their homes faster, reducing the amount of time their property stays on the market.
The Future of Mortgage Rates and Inventory
The current decrease in mortgage rates is not likely to be a short-term trend. According to a forecast by Freddie Mac, rates are expected to continue to decline, with the average 30-year fixed-rate mortgage dropping to 3.7% in 2019. This means that potential buyers will continue to take advantage of the lower rates and drive up demand in the housing market.
However, it’s important to note that inventory levels are still below average, and this could lead to a competitive market in some areas. As more homeowners decide to put their properties on the market, it’s possible that inventory will eventually catch up to the increased demand. This could result in a more balanced and stable housing market in the future.
In Conclusion
Lower mortgage rates have had a significant impact on the housing market, unlocking more inventory for buyers to choose from. The increased competition among buyers and sellers has created a more balanced market, benefiting both parties. With the forecasted decline in mortgage rates, this trend is likely to continue, making it a great time for buyers to enter the market and for sellers to list their homes.
