High cost of upgrading to nicer homes is causing low supply in housing market

From CNBC: 2024-04-02 14:43:28

The spring housing market is defying expectations of cooling prices and easing competition. Home prices in February were 5.5% higher than last year, and higher mortgage rates are not cooling the market. Sales of newly built homes nearly 6% higher in February and supply is still 40% below pre-pandemic levels.

In today’s existing home market, lack of supply is the real issue due to a lock-in effect, as homeowners won’t list their homes for sale because of high costs. Moving up to a 25% more expensive home would increase average monthly payments drastically, making it difficult for homeowners to upgrade.

Rates falling to 6% would ease the monthly payment increase for trading up to a more expensive home. Most borrowers today have rates below 6%, with a majority below 4% and some below 3%. The U.S. now has a record-high 550 “million-dollar” cities, with homes worth $1 million or more.



Read more at CNBC: High cost of upgrading to a nicer home is locking up the market