HomeBusinessThe housing market is thawing as more 'mortgage lock' homes come up...

The housing market is thawing as more ‘mortgage lock’ homes come up for sale, says JPMorgan

Fitch Ratings found that homes in 91% of U.S. metro areas were overvalued in the third quarter.Richard Newstead/Getty Images

  • It appears that the housing market is gradually approaching a recovery.

  • A growing number of mortgage-backed homes are going up for sale, according to JPMorgan.

  • Sales of existing homes have increased by almost 10% in February.

According to JPMorgan Asset Management, the housing market appears to be thawing, thanks to a growing number of mortgage lenders who are choosing to put their homes on the market.

The bank pointed to the “mortgage lock-in” effect, a phenomenon in which existing homeowners hesitate to sell their properties because they want to hang on to the lower rates at which they financed their homes years ago. That reluctance slowed homebuilding activity for most of 2023, with home sales down 18.3% last year, according to Redfin.

But home sales have risen in recent months – a sign that the lock-in effect could loosen its grip on potential sellers, the bank said. Existing home sales rose 9.5% in February, while existing home inventory rose 5.9% from the previous month, according to data from the National Association of Realtors.

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Homeowners may now be more willing to dive into the housing market as many realize high mortgage rates won’t go away anytime soon, real estate economists say. That adds much-needed inventory to the market, which is also being supplemented by new housing supply in the works: About 1.6 million homes are currently being built, JPMorgan estimates. Meanwhile, the number of completed homes rose to 1.7 million in February, up 15.6% from last year, Census data shows.

“The housing sector was one of the hardest hit sectors of the economy when the Fed started raising rates, but there are signs that activity has turned around,” JPMorgan strategist Stephanie Aliaga said in a note Thursday.

That means good news for homebuyers, who have been challenged by the imbalance between supply and demand in recent years. Buyers have fewer options than in the past, and the lack of inventory has also driven up home prices, with the average U.S. home costing $412,227 in February, Redfin data shows.

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Still, the housing market’s recovery will likely be “gradual,” Aliaga said — similar to the view of other real estate economists, who say it could take years for supply to fully catch up with demand. Researchers at the Federal Housing Finance Agency recently warned that the mortgage lock-in effect could persist for years, barring a sudden drop in mortgage rates.

Read the original article on Business Insider

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