If you're thinking about buying a home, the fact that mortgage rates are trending downwards is actually good news for you. It not only makes homeownership more affordable, but it might also encourage more people to list their houses for sale.

The Mortgage Rate Lock-In Effect

Hey there, over the past year, it's been tough finding the right home to move into because there haven't been many homes available on the market. This is because a lot of homeowners decided to hold off on selling when mortgage rates increased. According to an article from Freddie Mac, this has really impacted the housing market.

““The lack of housing supply was partly driven by the rate lock-in effect. . . . With higher rates, the incentive for existing homeowners to list their property and move to a new house has greatly diminished, leaving them rate locked.””

— Freddie Mac

The homeowners chose to stick around and hold onto their current, lower mortgage rate instead of making a move and getting a higher one for their new home.

Early Signs Show Those Homeowners Are Ready To Move Again

Did you see the latest info from Realtor.com? It looks like in December 2023, there were more folks listing their houses for sale compared to December 2022.

You know, this is really important. Usually, things slow down in the housing market towards the end of the year because some sellers wait until January to make their moves.

This is the first time since 2020 that we've noticed more new listings around this time of year. It might mean that the impact of locked-in rates is starting to ease due to the lower rates.

What This Means for You

While there isn't going to suddenly be an influx of options for your home search, it does mean more sellers may be deciding to list. According to a recent article from the Joint Center for Housing Studies (JCHS):

““A reduction in interest rates could alleviate the lock-in effect and help lift homeowner mobility. Indeed, interest rates have recently declined, falling by a full percentage point from October to November 2023 . . . Further decreases would reduce the barrier to moving and give homeowners looking to sell a newfound sense of urgency . . .””

— Joint Center for Housing Studies (JCHS)

Looks like you might start seeing more homes popping up for sale, giving you a bunch of new options to consider.

Bottom Line

With mortgage rates decreasing, we might see more sellers jumping back into the market. This could be your chance to snag the perfect home. Why not reach out to me? I can be your local expert, keeping you in the loop about the newest listings in our area.