WASHINGTON (7/15/14)--Mortgage rates for the past few years have remained at historically low levels, which has helped heal the housing market in the wake of the recession.
While low rates may have boosted lending, they also have kept prospective home sellers on the sidelines, as many have preferred not to trade in favorable rates on their current homes for inevitably higher rates on new homes.
"(Many homeowners) got the deal of the century," Glenn Kelman, CEO of the real estate brokerage firm Redfin, told The Associated Press. "I don't think in 100 years anyone will be lending money at 3.5%. How do you walk away from a deal like that?"
More than one-third of homeowners with mortgages pay less than 4%, according to CoreLogic, while the average new mortgage rate sits at 4.2%, meaning those who are enjoying the lower rates have much less incentive to sell and move.
In 2014, as many as 3.6 million homeowners will forego selling their homes because to do so would mean forfeiting lower mortgage rates, according to CoreLogic Chief Economist Mark Fleming.
Even for a house of the same size, those who sell and move are likely to pay up to 1 percentage point higher (The Associated Press via abcNEWS July 11).
Further, many who choose to move rent their old homes instead of selling them outright, The Associated Press reported, leaving even fewer homes available for sale and likely contributing to rising home prices.