The housing market is breaking out of mortgage rate lock as a wave of sellers look poised to list their homes in the coming years

The housing market is breaking out of mortgage rate lock as a wave of sellers look poised to list their homes in the coming years, per Zillow.


Zillow suggests that the housing market is gradually loosening its grip on the impact of elevated mortgage rates, potentially leading to an influx of sellers and increased inventory for buyers in the years ahead.

In a recent survey by the real estate listing site, 21% of homeowners expressed contemplation about selling their homes within the next three years. If these homeowners proceed with their plans, it could result in a new wave of housing inventory, providing relief for buyers who have faced a shortage of available homes in recent years.

The survey also revealed that homeowners with mortgage rates below 5% are nearly as inclined to sell as those with rates above 5%. This indicates a positive shift, suggesting that homeowners are becoming less deterred by current borrowing costs. High mortgage rates had dissuaded many from listing their properties for sale over the past year.

Zillow's chief economist, Sylar Olsen, commented on the findings, stating, "Rate lock appears to be wearing off for some homeowners, who show encouraging signs that they're ready to come back to the market." He noted that more homeowners with low rates are considering selling, while those with higher rates likely made recent home purchases. Currently, mortgage rates seem to have become less of a decisive factor in contemplating a sale.

Recent months have seen a decline in mortgage rates as the market anticipates a potential interest rate cut by the Federal Reserve later in the year. According to Freddie Mac data, the 30-year fixed mortgage rate was around 6.66% in the last week, compared to 8% in October of the previous year.

Additionally, Zillow data for December indicates a 2% year-over-year increase in new home listings. The total supply of homes on the market is now only 14% lower than pre-pandemic levels, marking an improvement from April when supply was 35% below the pre-pandemic norm.

The combination of lower rates and increased inventory has the potential to enhance housing affordability this year, as tight supply had driven home prices to record levels in 2023. According to CoreLogic's estimate, home prices rose by another 5% in October. Redfin economists predict that both prices and mortgage rates will experience slight easing throughout the year.