Redfin Report: 89% of People With Mortgages Have an Interest Rate Below 6%, Down From a Record 93% in 2022
January 12 2024 - 7:00AM
Business Wire
The share of homeowners with relatively low
rates has fallen because some have given up on waiting to move
until rates nosedive, and everyone who has purchased a home in the
last year did so when rates were above 6%
(NASDAQ: RDFN) — Nationwide, 88.5% of U.S. homeowners with
mortgages have an interest rate below 6%, down from a record high
of 92.8% in mid-2022, according to a new report from Redfin
(redfin.com), the technology-powered real estate brokerage.
That means more than 88.5% of homeowners with mortgages have a
rate below the current weekly average of 6.66%, prompting many to
stay put instead of selling and buying another home at a higher
rate—a phenomenon called the “lock-in effect.”
But for most people, it’s not realistic to stay put forever. The
share of homeowners with a rate below 6% has fallen from its record
high partly because some homeowners are opting to bite the bullet
and give up their low rate in order to move. Many are selling
because a major life event like a divorce has given them no other
choice, while others are putting their homes on the market because
they want to live in a different house or city.
Another reason the share has dipped: Everyone who purchased a
home in the last year—repeat buyers and first-time buyers alike—was
entering the market at a time when the average mortgage rate was
above 6%.
“I’m working with a lot of homeowners who are selling because of
things like divorces, new jobs or deaths in the family,” said David
Palmer, a Redfin Premier real estate agent in Seattle.
“I’m also working with homeowners who are bursting at the seams
and selling because they’ve outgrown their current home.”
It’s worth noting that for some homeowners, the fact that home
prices soared during the pandemic means they have enough equity to
justify selling and taking on a higher rate—especially if they’re
downsizing or moving somewhere more affordable.
The Lock-In Effect Continues to Fuel America’s Housing
Shortage, But Listings Have Started to Tick Up
Americans continue to face a shortage of homes for sale, and a
primary reason is the lock-in effect.
But home listings have been ticking up year over year, in part
because some homeowners simply have to move, as discussed above.
Listings are also rising because mortgage rates have fallen enough
in recent weeks to convince some homeowners to let go of their low
rate. Today’s 6.66% average mortgage rate is down from a peak of
roughly 8% in October.
“Sellers have started coming out of the woodwork because that’s
typical for January and because mortgage rates have dropped,”
Palmer said. “They’re also coming to terms with the fact that rates
aren’t going back down to 3% any time soon, which makes it easier
to pull the trigger on selling. But a lot of sellers are worried
about finding their next house because even though listings are
rising, there’s still a housing shortage. That’s part of the reason
so many sellers remain on the sidelines.”
Breakdown of where today’s homeowners fall on the
mortgage-rate spectrum
The following is according to a Redfin analysis of data from the
Federal Housing Finance Agency’s National Mortgage Database as of
the third quarter of 2023, the most recent period for which data is
available. The share of homeowners with rates below 6% likely fell
further in the fourth quarter because a dip in mortgage rates drove
more people to buy and sell homes, even as rates remained above
6%.
- Below 6%: 88.5% of mortgaged U.S. homeowners have a rate
below 6%, down from a record 92.8% in the second quarter of
2022.
- Below 5%: 78.7% have a rate below 5%, down from a record
85.6% in the first quarter of 2022.
- Below 4%: 59.4% have a rate below 4%, down from a record
65.3% in the first quarter of 2022.
- Below 3%: 22.6% have a rate below 3%, down from a record
24.6% in the first quarter of 2022.
Mortgage Rates Have Dipped, But It’s Still More Expensive to
Buy and Sell Homes Than It Was a Year Ago
The typical homebuyer purchasing today’s median-priced U.S. home
at the average mortgage rate takes on a monthly payment of $2,399.
While that’s down more than $300 from the all-time high in 2022,
it’s still up 7.4% from a year ago. That’s because both mortgage
rates and home prices are higher than they were at this time last
year.
Nearly all homeowners with a mortgage have a rate below the one
they would get if they bought a home today, but the difference in
monthly payments varies depending on each individual situation. A
mortgage holder in the 3% to 4% range is more likely to feel
handcuffed to their home than someone in the 5% to 6% range, for
instance.
To view the full report, please visit:
https://www.redfin.com/news/mortgage-rate-lock-in-housing-2023
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We
also run the country's #1 real estate brokerage site. Our
home-buying customers see homes first with same day tours, and our
lending and title services help them close quickly. Customers
selling a home in certain markets can have our renovations crew fix
up their home to sell for top dollar. Our rentals business empowers
millions nationwide to find apartments and houses for rent.
Customers who buy and sell with Redfin pay a 1% listing fee,
subject to minimums, less than half of what brokerages commonly
charge. Since launching in 2006, we've saved customers more than
$1.5 billion in commissions. We serve more than 100 markets across
the U.S. and Canada and employ over 4,000 people.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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Contact Redfin Redfin Journalist Services: Angela Cherry,
913-638-8249 press@redfin.com
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