Why homeowners aren't selling

 

Nine out of ten mortgages in America carry an interest rate of less than 5%, which is the official level at which most new 30-year fixed-rate mortgages are now being written.

 

Why it matters: Houses are affordable if you already own one. According to Fannie Mae's most recent national housing survey, 92% of homeowners say that their current home is affordable. More impressively 91% of lower-income homeowners say the same thing, up from just 79% at the end of 2017.

 

• Were those homeowners to move, however, they would need to pay substantially more in interest payments.

The big picture: If you hold a mortgage that's a lot cheaper than what you'd need to pay if you moved, that's a significant financial incentive to stay put. The result is that thanks to supply-and-demand dynamics, increased mortgage rates are less likely to mean lower home prices.

 

Between the lines: When mortgage rates rise, that lowers the supply of homes hitting the market. Lower supply means higher prices, especially in areas where many buyers are bidding in cash.

 

The bottom line: Americans are holding onto their cars for much longer than they normally would because replacing them is so expensive. Something similar is beginning to happen in real estate, too.