Now, those homeowners have “golden handcuffs” locking them into their current homes. Even the owner that might want to sell, perhaps because their home is now at its highest value in history, are thinking twice about it, because they are loathe to give up the attractive rate they have on their current home. And in some cases, this makes financial sense: homeowners who want to downsize could find that buying a lower-priced home at a higher rate might cost them more money per month. Basic economics tells us that when prices go up, supply also rises as sellers see an opportunity to take advantage. But with so many homeowners shackled by the “golden handcuffs,” we’re not seeing the normal economic response to higher prices.
Will this change? It’s tough to say. Many long-time homeowners are reaching the point where they might become agnostic as to rate, because they have so much equity in their homes that they don’t need to finance their next move. Others might just reach the point that they need to move for personal reasons, even if it means giving up their historically-low rate. And still others might see the recent stabilization, and in some cases decline, in average prices, and rush to get on the market before the music stops.
Going forward, we believe that sales will eventually stabilize, and that low inventory will continue to drive price appreciation. That’s not because we believe that the market is going to significantly strengthen, but only because we will be measuring off a much lower baseline, not off the strongest market in history. Accordingly, we believe that the market will hold to that 2013-2015 era level of sales, with low levels of inventories propping prices up near their current levels through the end of the year.