As mortgage rates and home prices dipped from record highs at the start of 2023, prospective homebuyers made a slow but promising return to the for-sale market. Mortgage applications surged 45.6% during the week ending Feb. 3 from four weeks prior, but according to Realtor.com, measures of homebuyer demand remain low compared with highs from one year ago.
Though a spring thaw has builders and buyers optimistic for a more active market in 2023, experts warn that a lack of for-sale inventory could keep prices high even in the midst of a widening market correction.
Much of the problem lies with homeowners who would typically trade up into a larger home or downsize into a smaller one. Right now, those who can’t buy in all cash generally don’t want to sell unless they have to do so. Most would prefer to hold on tight to the ultralow rates they locked in during the COVID-19 pandemic instead of having to get a new mortgage with a higher rate.
“Their desire to sell and lose that mortgage rate they’re likely to never see again is diminished,” says Matthew Gardner. He is the chief economist for the Seattle-based brokerage Windermere Real Estate, which operates in 10 Western states. So buyers “faced with limited inventory are going to find it more competitive than they would like.”