Hi! I’m Aziz. My newsletter contextualizes economic news using data visualization. These days I’m focusing on housing—let me know what you think by replying to this email, and/or by participating in the poll below.

The best measure of housing inventory is the number of homes listed for sale every month. Last month, a very small number—just over 400,000 homes—were listed. In the same month in 2019, almost 600,000 were listed. Homeowners are reluctant to sell because moving homes entails refreshing your mortgage rate—and current rates are far higher than most homeowners are paying on their current mortgages.

Other metrics suggest the situation is even slightly worse: active listings (which include not just new but older listings, too) and months of supply (the number of months it would take to sell inventory at current demand) are both half as large as they were on the eve of the pandemic. Current inventory covers less than 3 months of demand.

There are so few homes for sale partly because current homeowners are locked-into mortgages that are much lower than current market rates, as I wrote last week. Surveys have found that mortgage lock-in is the most important financial motivation for would-be sellers opting to wait—this has been the case since mid-2022.

But it’s not just about mortgages

That said, there are other reasons aside from mortgage lock-in that explain why sellers are sitting on the sidelines. Some cite the need for home improvements before selling—these are more expensive than in the past.

And other factors (including non-financial ones) are perennially more important than mortgages dynamics. Another survey found that the “need to purchase a new property first” is consistently the top concern for sellers—and this has intensified recently (though, there is a circularity here: part of the reason people are concerned about buying before selling is that there are few sellers and little inventory!).

Another piece of evidence that the dearth of sellers is not all about mortgage lock-ins: as Andrew Wishart at Capital Economics points out, sellers are unusually absent even in markets where mortgages are shorter duration and have already reset higher, such as Canada and the United Kingdom.

Still, mortgage lock-in is a major driver of the low-inventory dynamic. Lower rates (an often cited level is 5.5% for a 30-year mortgage) should draw both buyers and sellers into the market again.

Further reading:

Mortgage lock-ins: move it and lose it 0 people · Jun 2 Read full story

After booming home prices, a small correction 0 people · Jun 1 Read full story