Why Aren’t Housing Prices Dropping? | Buying a Home in Huntsville, AL

Mortgage rates are way up, and affordability is way down. You would expect prices to be coming down but they're not. So what is happening?

When it comes to housing prices not dropping, we've talked about a lot of the reasons like dollar devaluation and with a 5.5 million home deficit across this country there are also issues with of lack of supply. Another thing affecting housing prices is the mortgage rate lockdown effect.

Mortgage Rate Lockdown Effect

The mortgage rate lockdown effect is due to so many households having such low mortgage rates, that once rates rise, they have no interest in selling their home and getting locked into a much higher rate.

That's exactly what's happening. 85% of homebuyers have a rate of 5% or below, which is creating that mortgage rate lockdown effect. These would-be sellers are now staying on the sidelines and not putting their homes on the market for sale.

Why is anybody buying right now?

You might ask if 85% of all borrowers have a mortgage rate of 5% or below, why is anybody buying right now?

There are several answers to that. First, 38% of all purchasers do not have a mortgage. So simply, interest rates do not affect their purchasing power. Second, we have this huge segment of the population, millennials, that still have not purchased their first home yet and are still looking to enter into the marketplace.

Then life just happens, good things like having babies, marriage, and job promotions. Then we have bad things that happen like divorce and death. All of these different reasons make housing continue to move forward. There are always people buying in the marketplace, there are just fewer people buying, about 20 to 25% fewer people, buying in the marketplace today.

Are you ready to buy a new home? Talk to an MC Agent today to discuss your real estate goals!