Have you heard about the "lock-in effect" in real estate? It's the phenomenon where homeowners are reluctant to trade in their lower-rate mortgages for higher ones. This trend has been quite prevalent recently, impacting the housing market in various ways.
In the third quarter of 2023, fewer Americans had mortgages below 6% compared to the previous year, mainly due to people moving. What drives these moves? Major life events, often referred to as the "5 D's": diapers, diplomas, diamonds, divorce, and death.
Interestingly, between Q3 2022 and Q3 2023, more homeowners chose to move despite accepting higher mortgage rates. While the lock-in effect has contributed to inventory shortages, there's some relief as listings have started to rise, thanks to slightly lower rates (though still below the 8% peak of 2023).
Homeowners with historically lower mortgage rates (between 3% and 4%) are more likely to be affected by the lock-in effect than those with rates between 5% and 6%. Instead of fixating on rates, I advise buyers to focus on the affordability of their monthly payments.
If you're considering buying this spring and want to explore what it takes to get into your own home, schedule a 15-minute discovery call with us we would love to be your go to resource for all things real estate in Atlanta.
