By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
There are those of us here at Global Property Systems who watch Hudson Valley real estate trends and track local housing market movements (because what we really need is a hobby!) We have been blogging on for months now about the climbing home prices and vanishing residential inventory in the Hudson Valley, known to normal people as “Homes For Sale.” We typically attribute the lack of homes on the market to several causes:
- Owners are waiting for their home’s value to stop rising and top out.
- Everyone is waiting for the Covid-19 pandemic to go away.
- Sellers are waiting for the economy to get back into growth mode.
Whatever the reason, homeowners just aren’t choosing to move right now.
To make matters worse, there’s another reason to add to our bullet-point list to explain why homeowners are staying put:
- Low interest rates.
How do historically low mortgage rates slow sales in the Hudson Valley real estate market? The fact is that a lot of non-selling homeowners have chosen this time to refinance their mortgages instead, taking advantage of today’s nearly-zero cost of borrowing money.
Real estate economist Matthew Gardner was recently quoted in Inman News explaining the phenomenon. His comments were illuminating. “Look at the spread between the rate that owners had originally to the rate they refinanced into.” Gardner said. “What’s amazing is that owners who refinanced in the second quarter of this year saw their (interest) rate drop by an average of a whopping 25 percent.”
“Imagine you’re one of those homeowners who have refinanced, says Gardner, “and you’re sitting on an historically low interest rate. Now, imagine that it’s 2022 or 2023, and the rates have risen — likely quite significantly from present levels. The question will be: Are you going to sell and lose the historically low rate, or are you going to stay put?
If homeowners are anything like my father, who bought our house in 1953 and lived in it until he died, his four-percent mortgage interest rate was a thing of beauty and not to be messed with.
Gardener suggests that we may be heading toward a period where we see houses turn over at a far slower pace as we stay in our homes for longer than ever. This could be a problem as it might lead to persistently low levels of inventory for sale, which might lead to prices continuing to rise at an above-average pace. And that affects affordability.
We’ll continue to track the Hudson Valley real estate market for you here. In the meantime, is anybody collecting stamps these days?
To find out more about selling your home, or for more information, CONTACT US.