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The housing market appears to be gradually heading towards recovery.
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According to JPMorgan, homes with locked mortgages are increasingly being put up for sale.
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Meanwhile, existing home sales rose nearly 10% in February.
JPMorgan Asset Management says the housing market appears to be starting to thaw, as an increasing number of mortgage-bound sellers are choosing to put their homes on the market anyway.
The bank pointed to the “mortgage lock-in” effect, a phenomenon in which existing homeowners are reluctant to sell their properties because they are trying to hang on to the low interest rates they received when they took out their mortgages years ago. . This reluctance has slowed home sales activity for much of 2023, with home sales down 18.3% last year, according to Redfin.
However, home sales have been trending upward in recent months, a sign that the lock-in effect may be softening the impact on prospective sellers, the bank said. According to data from the National Association of Realtors, existing home sales rose 9.5% in February from the previous month, and existing home inventory rose 5.9%.
Real estate economists say homeowners may be more willing to enter the housing market, realizing that many mortgage rates aren't going away anytime soon. This is adding much-needed inventory to the market, which is also complemented by the ongoing new housing supply. JPMorgan estimates that approximately 1.6 million homes are currently being built. Meanwhile, the number of completed housing units surged to 1.7 million in February, an increase of 15.6% from a year earlier, according to census data.
“The housing sector was one of the hardest-hit areas of the economy when the Fed started raising interest rates, but economic activity has turned around,” JPMorgan strategist Stephanie Arriaga said in a note Thursday. There are signs,” he said.
This is good news for home buyers who have been plagued by a supply-demand imbalance in recent years. Buyers have fewer options than before and a lack of inventory is also pushing up home prices, with the median U.S. home price in February at $412,227, according to Redfin data.
Still, the housing market's recovery is likely to be “gradual,” Arriaga said, echoing the view of other real estate economists that it could take years for supply to fully catch up with demand. is. Federal Housing Finance Agency researchers recently warned that the mortgage lock-in effect could continue for years to come unless mortgage rates suddenly drop.
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