For months, experts have been sounding the alarm about how Americans who took out mortgages when rates were low are reluctant to sell and borrow now that they've skyrocketed.
New research, however, has found there is a magic number that makes homeowners more motivated to move.
A June survey of 1,815 homeowners from real estate listing site Zillow found that homeowners with mortgage rates 5% or higher were significantly more likely than those with lower rates to say they plan to sell. As home listings tick down amid today's elevated rates, the findings suggest that supply could increase again in the coming years.
What the data says
Homeowners with mortgage rates 5% and up were twice as likely to say they plan to sell their homes in the next three years than those with rates under 5%. Among homeowners who said they have plans to sell, almost half paying mortgage rates above 5% said they already have their house listed for sale. (Only 20% of homeowners paying rates below 5% said the same.)
For perspective, about 80% of mortgage borrowers said their current rate is below 5%, and 90% have a rate under 6%. Nearly a third said their rate was less than 3%.
Of homeowners with higher mortgage rates who said they were thinking about selling, 65% said rates were an influencing factor. About 35% of lower-rate homeowners said the same.
Keep in mind, though, that factors other than mortgage rates can play a role in a homeowner’s choice. The survey found that fewer than half (42%) of all homeowners thinking about selling said that mortgage rate fluctuations were a reason they decided to move.
What it means
Mortgage rates are hovering around 7% at the moment, and most homeowners would have to take out new mortgages at a higher rate if they were to move. According to Zillow, the ordinary monthly mortgage payment is now twice what it was in 2020, when rates were at historic lows.
Homeowners who took out mortgages when rates were lower could pay hundreds more a month if they take out a new mortgage right now. It’s no surprise that, as a result, homeowners are reluctant to move and locked into their current rates.
Mortgage rate locks push home prices up and listings down, creating a challenging market for buyers. Zillow’s June housing market report found that there were 28% fewer new for-sale listings compared to the same time last year.
Home values have climbed in all the 50 largest metropolitan areas, bringing the typical U.S. home price to more than $350,000. Another recent report from real estate listing site Redfin found that homebuyers have lost $60,000 in purchasing power in the last year. Mortgage rates are so high that "many homeowners will move only for major life events, like a new baby or retirement," Orphe Divounguy, a senior economist at Zillow Home Loans, said in a news release.
Despite the difficult circumstances, Zillow says its analysis offers hope that more homes could hit the market in the next few years as homeowners accept higher rates as the new norm. About 23% of homeowners surveyed said they were thinking about selling in the next three years or already have their home listed. Among homeowners with a mortgage rate above 5%, 38% said they would consider selling their home in the next three years.
Additional research from Zillow Home Loans also found that buyers are finding creative ways to cope with high mortgage rates.
A separate survey released in April found that 45% of all buyers are purchasing mortgage points — which allow buyers to pay a fee to buy down the interest rate on a loan — to lower their interest rate. They're also opting for smaller, cheaper homes and keeping an open mind when it comes to their wish lists.
More from Money: