Inventory Shortage Nullifies Benefits of Low Mortgage Rates
Redfin believes that all the good work done by low mortgage rates has been nullified by inventory shortage. Low mortgage rates had increased affordability but lack of homes has fueled up prices.
“Low mortgage rates are motivating many people to purchase a home, particularly those who want more space to work from home but because there hasn’t been an increase in the number of homes for sale since rates started dropping with the onset of the pandemic, many buyers end up competing for the same homes, driving up prices,” said Daryl Fairweather, Redfin’s Chief Economist, in a press release.
“Those competing forces make the current market a wash for many buyers looking for single-family homes in competitive areas,” Fairweather further stated.
To show the difference, any buyer on a budget of $2,500/month can look for a property worth $516,000 now, compared to $483,250, at the same time in July ‘19’. This is the direct implication of the near 3% mortgage rates currently doing the rounds.
Another important piece of information is that the listing volume going into the contract has come down by 5.8% on the weekly chart. In a report, Jeremy Sicklick, HouseCanary CEO said that “The sustained supply deficit, lifting of COVID-19 precautions in several states and the devastating effects of natural disasters across the country have created impending risks that are difficult for potential homebuyers to ignore,”