Mortgage Rate Lock In Effect: How It’s Changing Home Buying This Year!

If you are looking to buy a home, the recent downward trend in mortgage rates is good news because it helps with affordability. But there is another way that this benefits you. It may inspire more homeowners to put their homes up for sale. It's called the mortgage rate lock in effect. Let me explain.

Over the past year, one factor that's really limited the amount of options for your move is how few homes are on the market. That's because many homeowners chose to delay their plans to sell once mortgage rates went up. The lack of housing supply was partially driven by the rate lock. In effect, with higher rates, the incentive for existing homeowners to list their property and move to a new house has greatly diminished, leaving them rate locked. These homeowners decided to stay put and keep their current lower mortgage rate, rather than move and take on a higher rate with a new home.

Early signs of these homeowners that are ready to move are high, according to the latest data from Realtor.com and in my own personal research, there were more homeowners putting their homes on the market for sale, known to the industry as new listings in December 2023 as compared to December 2022. The same has been true for January 2024 as compared to January 2023.

Now, here's why this is so significant. Typically, activity in the housing market cools down in the later months and in early months of the year, as some sellers choose to delay their moves until February and March are all around. This is the first time since 2020 that we've seen an uptick in new listings this time of year. This could be a signal that the rate lock, in effect, is easing a bit in response to lower rates.

Now what does this mean for you? Well, there isn't going to be a sudden influx of options for your home search. This does mean that more sellers may be deciding to list their home. A reduction in interest rates could alleviate the lock in effect and help lift homeowners mobility.

Indeed, interest rates have recently declined, falling by a full percentage from October to November. Further decreases would reduce the barrier to moving and give more homeowners looking to sell a newfound sense of urgency with lower rates. For example, rates right now are in the mid 60s, and this means that you may see more homes come to the market and give you more options to choose from.

I have personally researched several programs that we can offer to you as well, with rates that start at as low as 2.99%.

So the bottom line is, as mortgage rates come down, more sellers may reenter the market. And that gives you more opportunity to find the home that you're looking for.

So if you're interested in finding out what sellers may want to come to the market soon, I could show you some off market listings. And if you're interested in interest rates starting at about 2.99%, don't hesitate to reach out. Go to davefriedmanteam.com to inquire more, and either call us or fill out the form.