Would-be home sellers across the country are grappling with a once-in-a-lifetime problem: They have mortgage rates so absurdly low it would hurt them financially to sell.The great moments of the Fed's "price fixing" of the economy.
Doing so would mean giving up an irresistible rate in exchange for a new mortgage carrying a rate up to a percentage point higher. Their monthly payments would be larger even for a house of the same price. That's discouraging some people from selling, thereby limiting the supply of available homes and contributing to slower home sales.
It's a significant shift from the way the U.S. housing market has worked for the past 30 years. For most of that time, whenever a homeowner decided to trade up to a better home, mortgage rates usually were lower than the last time they had bought. That helped make a new purchase seem more attractive.
But that is changing. The average rate on a 30-year mortgage fell below 4 percent in late 2011 and reached a record low level of 3.3 percent in November 2012. It didn't top 4 percent again until mid-2013. Homeowners took advantage of the lower rates and a refinancing boom ensued.
More than one-third of homes with a mortgage now have rates below 4 percent, real estate data provider CoreLogic estimates. Yet mortgage rates now average 4.2 percent. That is still low by historical standards but up about three-quarters of a point from a year and a half ago. And should mortgage rates rise later this year and next, as many economists expect, even more homeowners will be affected.
As a result, many homeowners with low rates are staying put. Others are moving and buying new homes, but keeping their old ones and renting them. Both choices mean that fewer homes are listed for sale, which drives up prices. Higher prices and limited selection have put the brakes on a housing recovery that began in 2012.
Saturday, July 12, 2014
The AP reports:
Posted by Steve Bartin at 6:37 AM