Vivian Hanover Ventures

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Recently, as of July 2023, the housing market has witnessed an unusual phenomenon: a tipping point. Right now, many homeowners are teetering on the edge between deciding to stay put and venturing to sell one’s property. For many homeowners, the magic number helping them determine if they should stay or go is a 5% mortgage rate. According to a recent Zillow survey, a staggering 38% of individuals with a mortgage rate of 5% or more are considering selling their homes. This figure contrasts sharply with the 21% who reported the same but held rates below this crucial 5% threshold.

The Bigger Picture 

But what does this mean for the broader housing market? For a significant time now, higher mortgage rates have discouraged homeowners from relocating. The result? A slow-moving resale market and an increased appetite for new constructions. Potential homebuyers are funneling into the new build market because there isn’t enough choice in existing home inventory. 

However, with 80% of mortgage holders currently sitting below the 5% rate and nearly a third enjoying rates under 3%, this disparity could reach its climax. The consensus, as expressed by Orphe Divounguy of Zillow Home Loans, is that a resurgence to 5% mortgage rates is not on the immediate horizon. Thus, many homeowners may wait for significant life milestones before contemplating a move. 

A Glimmer of Hope? 

Yet, there’s a silver lining for eager buyers. Almost a quarter of homeowners are contemplating listing their homes in the near future, a jump from 15% a year ago. This suggests a potential influx of properties entering the market soon, providing much-needed relief to the current inventory crisis. 

Beyond the Numbers 

However, it’s crucial to remember that the decision to move isn’t solely based on mortgage rates. Personal factors, such as the allure of a more luxurious dwelling or an expanding family, remain significant catalysts. While the shortage in the resale market has certainly propelled home values, with June witnessing a record-breaking average value surpassing $350,000, the human element of home selling and buying remains undeniably intricate. 

The 5% mortgage rate serves as a symbolic, yet significant, marker for many homeowners, indicating a time to reassess their current living situations. While economic factors certainly weigh heavily in these decisions, personal and lifestyle elements will continue to play a key role in the housing market.