A recent National Housing Survey conducted by Fannie Mae has unveiled that the impact of low mortgage rates, a condition known as the "lock-in" effect, is less significant in influencing homeowners' decision to stay in their current homes longer than initially intended. This finding contradicts the popular belief that arose during the COVID-19 pandemic, when homeowners were thought to be hesitant to move due to potentially higher mortgage rates on their next homes.
In 2022, mortgage rates doubled from an all-time low of around 3%, leading to an almost 18% drop in home sales, after experiencing a 14% increase from 2019 to 2021. The survey revealed that among homeowners planning to stay longer in their current homes, only 21% of mortgage borrowers cited being "locked-in" at a low rate as the main reason. Other factors such as satisfaction with their current home (19%) and high home prices (13%) also played a significant role.
Fannie Mae economists argue that the decrease in home listings can be attributed to more factors than just the lock-in effect. The COVID-19 pandemic has underscored non-financial factors such as remote work, which has enabled people to purchase homes in vacation spots, and an increase in home improvement spending. Additionally, demographic shifts have also played a part; baby boomers account for 32% of homeowners, with over 80% expressing a preference to age in place.
The survey also highlighted a broader trend of decreased general mobility. The annual mover percentage dropped from 16.8% to 12.6% between 2006 and 2022. A previous Fannie Mae study showed that homeowner mobility rates were 25% lower compared to the pre-Great Recession era.
Despite these findings, Fannie Mae economists do not predict a surge in home listings even if mortgage rates were to significantly decline. They believe that the period of low interest rates may have accelerated potential sellers' plans to move, thus reducing the pool of potential sellers in the current market. Furthermore, the scarcity of existing homes for sale persists into 2023, with only 1.1 million homes available, a 40% reduction compared to pre-pandemic levels.
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