“They say, ‘I’m just not going to make a move, because I’d have to downgrade,’” he said. “It’s like, ‘I’m not going to take a job in another city, because I’d have to get a higher mortgage rate, and I’d have to move into a small home, and I’m just going to stay here.’ That has downstream effects on the market because you’re not selling your home, which means there’s nothing available, which means there are fewer homes available for a larger group of buyers.
“It’s harder to get into the matching process here. If you’re not a seller, you’re also not a buyer in the place you were going to buy. It’s like, ‘I have a job offer in Ohio, but I can’t sell my home in Virginia because I’ve got a super low rate. So, now I’m not going to move. So that means there’s one less home on the market in Virginia and there’s one less buyer in Ohio.”
In the short term, a continued decline in rates would help correct some of the imbalance. Otherwise, Malone believes the market will naturally return to balance as people are forced to refinance low-rate mortgages due to life events.
“A rate drop would accelerate this,” he said. “It will also kickstart a lot of refis, potentially from people who bought after rates increased. Otherwise, the market will slowly fall out of this because, eventually, people just have to move for some reason. They lose the so-called golden handcuffs, and they move into another home. Eventually, just enough happens that it’ll cascade and the market will stop moving at this pace.”
