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After exceeding the 7% threshold in August, mortgage rates are at their highest point in two decades, and that affordability obstacle is leading to what economists are calling an “inventory crunch.” The total number of U.S. homes for sale fell 7.9% year-over-year in August, as a growing share of would-be sellers decided to stay in their existing homes.

While home builders are working to fill that gap with a supply of new homes, the share of existing homes listed on the market is expected to drop further, reports. And the Federal Reserve recently signaled it may raise benchmark interest rates yet again before the end of 2023.

This trend of dwindling listings seems even more stark when compared with the pre-pandemic era of 2017–19, which enjoyed nearly double the number of homes for sale than are available today.

This contraction is happening on both sides of the negotiation table: For homebuyers, rising rates have driven up housing payments past what many can afford. Meanwhile, homeowners who have mortgages at much lower rates are understandably reluctant to give them up.

“This differential has led a lot of homeowners to choose to stay in their homes instead of selling and moving,” says Chief Economist Danielle Hale, “and is a key contributor to low housing inventory.”

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