‘Prices Keep Marching Higher’ As US Home Sales Recover
US existing home sales actually rose last month, data out Wednesday showed. That (an increase in existing home sales) is something you don't see every day.
America's vexing housing conundrum centers on an acute dearth of resale inventory. This is quite simple: Homeowners who don't own their house free and clear generally have very low mortgage rates. They aren't excited to trade their rate for one that's higher. So, they don't sell. Limited inventory keeps a floor under prices by ensuring the m
Assuming mortgage rates decline, it will be interesting to see which force is stronger: increasing supply of sellers putting their homes on the market, or increasing demand of buyers qualifying for those lower rate mortgages.
Most sellers will have substantial equity and the rate on a new mortgage will only apply to a portion of the price of their next home. For most buyers, the rate on a new mortgage will apply to the entire price ex-down payment of their next home. So I speculate that lower rates may unleash more demand than supply. But this is uninformed speculation – I’m no real estate pro.
That speculation makes sense to me. Relatively equity-heavy sellers should be less sensitive to falling interest rates than relatively debt-heavy buyers. OTOH, the relatively debt-dependent buyers are more likely to simply be priced out even if they benefit more from lower interest rates than the sellers.