Current homebuyers were reluctant to sell homes in January because of fears they might not find a home to buy, according to First American Financial (FAF) Corp. Chief Economist Mark Fleming.
Fleming said the so-called “match-trap” was caused by higher mortgage rates which made homes less affordable and discouraged some sellers and buyers.
According to FAF’s January Potential Homes Sales model, potential existing-home sales decreased to a 5.5 million seasonally adjusted, annualized rate (SAAR). The January SAAR was an 81.7 percent increase from the market potential low point in December 2008.
In January 2017, the market potential for existing-home sales decreased to 107,000 (SAAR) sales, 1.9 percent below January 2016.
“While higher mortgage rates did reduce the market’s potential, they also will have the positive effect of moderating house price appreciation,” Fleming said in a press release. “More troubling is the lack of homes for sale, which is causing a ‘matching-trap’ where current homeowners are reluctant to sell because of concerns about the ability to find a home to buy and the likelihood that their new mortgage will have a higher rate than their existing mortgage.”
Fleming said rising mortgage rates decreased affordability and reduced first-time homebuyer demand.
“The low inventory of homes for sale, currently 3.6 months’ supply, continues to be a concern,” Fleming said. “Tight supply accompanied by rising prices is more indicative of a market reacting to a shift in the willingness of homeowners to list their homes for sale, and less indicative of a market reacting to a shortage of demand due to affordability issues. Restricted demand would result in lower quantity of homes for sale and lower, not higher, prices.”