Blame Surging Mortgage Rates For Threadbare For-Sale Listings

For most homeowners, selling means giving up a locked-in low mortgage rate

By
Diccon Hyatt
Diccon Hyatt
Full Bio
Diccon Hyatt is an experienced financial and economics reporter who has covered the pandemic-era economy in hundreds of stories over the past two years. He's written hundreds of stories breaking down complex financial topics in plainspoken language, emphasizing the impact that economic currents would have on individuals' finances and the market. He's also worked at The Balance, U.S. 1, Community News Service and the Middletown Transcript.
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Published March 07, 2023
A couple tours a for-sale home.

Thomas Barwick / Getty Images

Despite sky-high home prices, many would-be home sellers have a powerful reason not to list their houses: locked-in low interest rates.

The phenomenon has only intensified as mortgage rates climbed over the past year—an indirect consequence of the Federal Reserve’s anti-inflation interest rate hikes. 

Key Takeaways

  • Mortgage rates have risen since their 2021 lows, a byproduct of the Federal Reserve's fight against inflation.
  • "Locked-in" interest rates are prompting more people to hold on to their homes than usual.
  • Rates are so high that they're pricing some buyers out of the market.

People selling their home and buying a new one are almost certain to get a worse deal on their next mortgage. The average rate offered for a 30-year fixed mortgage was 6.65% last week, according to Freddie Mac. As of the third quarter of 2022, the most recent data available, 92.6% of homeowners were paying less than 6%, according to the Federal Housing Finance Agency. 

It’s little wonder, then, that in January just 980,000 homes were listed for sale, according to the National Association of Realtors, far below the 1.46 million available pre-pandemic.

The data shows how soaring mortgage rates are hurting the housing market from both sides: pricing many first-time buyers out of the market and keeping would-be sellers on the sidelines. The high mortgage rates drove mortgage applications for home purchases to a 28-year low last week, the Mortgage Bankers Association said. 

“Higher rates don’t just reduce house-buying power, they may keep existing homeowners rate locked-in, preventing more supply from reaching the market, and you can’t buy what’s not for sale,” Mark Fleming, chief economist for First American Financial Corporation, wrote in a recent blog post.

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  1. Freddie Mac. "Mortgage Rates."

  2. Federal Housing Finance Agency. "National Mortgage Database Aggregate Statistics."

  3. National Association of Realtors. "Existing Home Sales."