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The housing market looks to be gradually approaching a recovery.
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A growing number of mortgage-locked homes are going up for sale, JPMorgan said.
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Existing-home sales, meanwhile, jumped by nearly 10% in February.
The housing market looks like it’s starting to thaw, thanks to a growing number of mortgage-locked sellers opting to put their homes on the market anyway, JPMorgan Asset Management said.
The bank pointed to the “mortgage lock-in” effect, a phenomenon where existing homeowners are hesitant to sell their properties because they’re looking to cling onto the lower rates they financed their homes at years ago. That reluctance slowed housing activity for most of 2023, with home sales plunging by 18.3% last year, Redfin data shows.
But home sales have ticked higher in recent months — a sign that the lock-in effect could be easing its grip on prospective sellers, the bank said. Existing-home sales jumped by 9.5% in February, while existing-home inventory rose by 5.9% from the prior month, data from the National Association of Realtors shows.
Homeowners could now be more willing to dip into the housing market as many realize high mortgage rates aren’t going away anytime soon, real-estate economists have said. That adds some much-needed inventory to the market, which a new housing supply in the works is supplementing: There are around 1.6 million homes being constructed, JPMorgan estimated. Meanwhile, housing completions jumped to 1.7 million in February, 15.6% higher than last year, Census data shows.
“The housing sector was one of the hardest hit areas of the economy when the Fed began raising rates, but there are signs activity has turned a corner,” Stephanie Aliaga, a global-market strategist at JPMorgan, said in a note on Thursday.
That spells good news for homebuyers, whom an imbalance of supply and demand has challenged for the past few years. Buyers have fewer options than they did in the past, and the lack of inventory has also pushed up home prices, with the median US home costing $412,227 in February, Redfin data shows.
Still, a recovery for the housing market will likely be “gradual,” Aliaga said — similar to the view of other real-estate economists, who have said that it could take years for supply to fully catch up with demand. Researchers from the Federal Housing Finance Agency recently warned that the mortgage lock-in effect could linger for years unless there’s a sudden drop in mortgage rates.
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