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Notebook and Pen


91% of Outstanding Mortgages are at 6% or less!

Because so many homeowners have ultra low interest rates, we're not going to see the housing supply shortage begin to ease until rates start retreating back into the 4-6% range. We will still be in a seller's market for an extended period of time due to a decades long shortage of housing construction, but at least this could help ease the ultra competition among buyers by allowing sellers to justify giving up their incredibly low interest rates and selling homes they have long put off doing. It's easier for them to justify going from a 3-4% interest rate to a 5-6% interest rate, rather than 7% where they are today!

This increase in supply will help ease the ultra competition buyers have been experiencing since 2020, and help return the housing market to more of a balanced market, although we will be in sellers' market territory for quite some time to come.

Only a tenth of mortgages have an interest rate above 6% — that’s a big problem for the U.S. housing market

Last Updated: July 18, 2023 at 10:46 p.m. ETFirst Published: July 14, 2023 at 12:15 p.m. ET

Mortgage rates are inches away from 7% — but less than a tenth of U.S. homeowners have a home loan at that rate.

In fact, only 9% of all existing mortgages in the U.S. were taken out with a rate of above 6%, according to data from the Federal Housing Finance Agency, and analyzed by Torsten Slok, chief economist of Apollo Global Management.

Around a quarter of all mortgages — 23% — have a rate of less than 3%, Slok added, and 38% homeowners have a mortgage rate of between 3% and 4%.

In other words, the vast majority of U.S. homeowners have low mortgage rates.

Today’s home buyer vs. pandemic-era buyer

Millions of homeowners took advantage of ultra-low rates during the pandemic to lower their monthly payments. A recent study by the New York Fed found that 14 million outstanding mortgages were refinanced during the pandemic years. The typical homeowner who did so during this period saw their monthly payment fall by $220, the Fed said.

But today’s homebuyer is facing a much more expensive path to homeownership: Mortgage rates have surged since, and the 30-year was averaging at 6.96% as of July 13, according to Freddie Mac FMCC, +0.98%.

A typical new homeowner today will join the ranks of the small group that has a home loan with an interest rate of above 6%.

Low rates leading to supply shortage

But with millions of homeowners holding onto such low rates, that presents a big problem that’s frozen the housing market — one of low supply. That’s driven by their reluctance to sell.

If a homeowner was to sell their home and purchase another property, if they need to take out another mortgage, they would have to take out a home loan at a rate at 7% or even higher, depending on what their lender was quoting them.

“The bottom line is that homeowners across America do not have any incentive to move and get a new mortgage,” Slok said.

And “this is a key reason why the supply in the housing market continues to be so low,” he added.

The supply of new homes has been severely constrained by this imbalance between current rates and lower rates held by the majority of homeowners. New listings — a measure of how many sellers were putting up their homes for sale — were down 27% in early July versus a year ago, according to data from NWSA, -1.44%. also noted that 82% of those who are looking to buy or sell their home are feeling “locked in” by their low mortgage rate.

As a result, more than half of sellers are waiting for rates to come down before making a move, said.

Young homeowners delay selling

Younger homeowners in particular feel more stuck, given that they have more mortgage debt left to pay off compared to their older counterparts, who have been paying it off for years.

Nearly 80% of millennial homeowners, aged 27 to 42, were planning to delay their plans to sell their homes in the next 3 years, according to a separate survey of over 1,400 U.S. homeowners by Harris Poll and Credit Karma, published last week.

“Some homeowners are willing to stay in homes they’ve outgrown or even rent out their current home, and move into more affordable housing temporarily,” the report stated.

Some young homeowners are even considering living with a spouse or a partner they have split from, or putting off having kids, just to avoid selling their home.

In contrast, baby boomers, aged 59 to 72, feel least trapped by rates, Credit Karma found.

One reason for this is their lack of need for mortgage financing: 43% said they would not need a mortgage to buy a new home, Credit Karma said. Additionally, 28% said they have enough money to cover the high rates.

The lack of previously-owned houses available for sale by homeowners has led some keen buyers to look at new homes instead. Consequently, new home sales have jumped by 12.2% as of May 2023, according to the federal government.

( is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.)


Content by Vidona Residential Columbia Realtors

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