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The Epoch Times
The Epoch Times
28 Sep 2023


NextImg:Historic Lack of Housing Inventory Has Left Buyers on the Sidelines

The number of homes on the market nationwide continues to dwindle, with 3.1 months of supply, the lowest level ever at this time of year, according to the National Association of Realtors (NAR). And while some homes are still being sold, people in the real estate industry say they've never seen anything like this.

Among those is broker Lisa Briganti, who has been in the real estate industry for over three decades. “I’ve certainly never seen this before. People want to sell their homes, but they’re not going to because their current interest rate is around 3 percent. So they’re staying put,” Ms. Briganti, who owns Briganti Properties in South Carolina, told The Epoch Times.

She says there are only four reasons people consider moving today: “divorce or marriage, having kids, death, or job relocation.”

Many also believe the housing market will remain inventory-deprived unless the Federal Reserve (Fed) begins cutting rates again. When that will be is anyone’s guess, with some economists pointing to mid to late 2024 as a possibility. The latest decision by the Fed left benchmark interest rates the same at the 5.25 percent to 5.5 percent level.

One belief not being debated right now is that the deficient level of homes across the country's market is unprecedented.

“If we look at our data coming out of the pandemic, we were concerned about 2 million homes in the marketplace. Today we have 1 million,” NAR Deputy Chief Economist and Vice President of Research Jessica Lautz said to The Epoch Times.

“It’s really very concerning. Young adults should be looking for their first home, and we know there have been marriages and divorces, but there’s no inventory for them,” Ms. Lautz added.

'The Lock-in Effect Is a Real Thing'

Fed Chairman Jerome Powell pointed out that rate hikes have made it nearly impossible for people to move out of their current homes. Referred to as so-called lock-in rates, existing homeowners have contributed to stagnation in the mortgage lending market and the nation's broader housing woes by staying put. Although the Fed has raised interest rates 11 times over a year and a half period, Mr. Powell said he doesn't regret the central bank's monetary policy moves that played a significant role in the problem.

According to online real estate company Redfin, more than 90 percent of homeowners have lock-in mortgage rates below 6 percent, many under 4 percent on loans signed when the Fed held interest rates near zero. The mortgage interest rate for a 30-year fixed mortgage is hovering near 8 percent today and continues to climb.

By some estimates, more than 90 percent of homeowners have locked in mortgage rates below 6 percent, with many paying less than 4 percent on loans while the Fed held interest rates near zero. Even with a historic lack of inventory, the vast difference between those rates and current market rates has kept homeowners from listing their properties to sell out of fear of not finding a suitable replacement.

“The lock-in effect is a real thing. Many homeowners can’t afford to move and buy the exact same home, and they’ve been priced out of the market,” Ms. Lautz said.

She added that realtors typically count on one group of buyers remaining on the sideline. “Every market is different, but on a nationwide sales basis, we see first-time buyers at historic lows.”

Ms. Lautz noted that many potential first-time buyers have moved back in with their parents to save enough money for a down payment.

Ms. Briganti says her situation in Greenville, South Carolina—a popular location for northerners to move to during the pandemic and the home of a burgeoning automotive market with Michelin’s U.S. headquarters and BMW making SUVs in nearby Spartanburg—is not unlike the rest of the country when it comes to clients.

“I have a pool of buyers without enough houses to show them. Many are first-time buyers or those relocating here who want to buy. It used to be for us, you’d have a sale and then a purchase. Now, if you have a sale, they’re probably moving out of state,” she said.

According to the NAR, nationwide home prices have jumped 0.6 percent, with the median price of a home in the United States, not including new construction, at $410,200, representing the second-highest level since it began tracking that data, topped only by home prices in 2022. But Zillow estimates home values have increased by $2.6 trillion in the past year.

Meanwhile, the Fed has scheduled two more meetings at the end of this year, and the residential and commercial real estate industries are cautioning regulators on any further rate hikes.