More than nine of every 10 homeowners with mortgages (91.8 percent) have an interest rate below 6 percent, according to a new report from Redfin.
That’s down just slightly from the record high of 92.9 percent in mid-2022.
Well over 92 percent of homeowners with mortgages have rates below the current weekly average of 6.71 percent, which is near the highest level in over 20 years. Homeowners holding onto their comparatively low mortgage rates is the main reason for the major shortage of new listings, according to Redfin.
Here’s Redfin’s full breakdown of where today’s homeowners fall on the mortgage-rate spectrum:
• Below 6 percent: 91.8 percent of U.S. mortgaged homeowners have a rate below 6 percent, down from a record high of 92.9 percent in the second quarter of 2022.
• Below 5 percent: 82.4 percent have a rate below 5 percent. That’s down from a peak of 85.7 percent in the first quarter of 2022.
• Below 4 percent: 62 percent have a rate below 4 percent, also down from a record high (65.3 percent) hit in the first quarter of 2022.
• Below 3 percent: 23.5 percent have an interest rate below 3 percent, near the highest share on record. The highest was 24.6 percent in the first quarter of 2022.
Many would-be sellers are staying put rather than listing their home to avoid taking on a much higher mortgage rate when they purchase their next house. This “lock in” effect has pushed inventory down to record lows this spring. New listings of homes for sale and the total number of listings have both dropped to their lowest level on record for this time of year, which is fueling homebuyer competition in some markets and preventing home prices from falling further even amid tepid demand, Redfin added.
“High mortgage rates are a double whammy because they’re discouraging both buyers and sellers–and they’re discouraging sellers so much that even the buyers who are out there are having trouble finding a place to buy,” Redfin Deputy Chief Economist Taylor Marr said in a release. “The lock-in effect is unlikely to go away in the near future. Mortgage rates probably won’t drop below 6 percent before the end of the year, and most homeowners wouldn’t be motivated to sell unless rates dropped further. Some of them simply don’t want to take on a 6 percent-plus mortgage rate and some can’t afford to.”
Just over one-quarter (27 percent) of U.S. homeowners who are considering listing their home in the next year would feel more urgency to sell if rates dropped to 5 percent or below. That’s according to a Redfin survey conducted by Qualtrics in early June. Roughly half (49 percent) would feel more urgency if rates were to drop to 4 percent or below, and the share increases to 78 percent if they were to drop to 3 percent or below—a situation that is highly unlikely in the near future, Redfin data shows.
“The only people selling right now are the ones who need to,” Atlanta Redfin Premier agent Jasmine Harris said. “The last three potential sellers I’ve met are people who are moving out of the country. I’m also working with someone who’s moving out of town for a new job and another person who needs a smaller home for health reasons. So, there are some homes coming on the market, but not nearly as many as there would be if rates weren’t so high. In more typical times, we’d also have people selling simply because they wanted to move to a different neighborhood or wanted a bigger home and/or one with different features.”