Why many would-be home sellers feel stuck

Some homeowners are considering moving, but there is a big roadblock in their way: elevated interest rates.

A February survey of 2,000 people who were looking to sell their home in the next 12 months, found that 86% were planning to buy another home, but of those respondents, 56% are waiting for rates to come down.

A new mortgage at this point in time will likely have a higher rate, creating a "major affordability hurdle," the report published by Realtor.com in collaboration with market research and data analytics company HarrisX said.

In November, rates grew to 7%, but have since come down to 6.27% for the weekly period ending April 13, per Freddie Mac's Primary Mortgage Market Survey. Some industry stakeholders predict that interest rates will continue sliding to 5% by the end of year. But even if they do, the rates will be much higher than those seen during the pandemic.

Per the survey, this is weighing on the desire to sell for current homeowners, with 82% of them feeling "locked in" by their currently low mortgage rate. It is also contributing to a decline in the number of homes hitting the market.

"One positive aspect that came out of the pandemic was historically low mortgage rates – and many people took advantage of this opportunity to buy their first home, upgrade to a more expensive home or refinance the home they were in," said Danielle Hale, chief economist at Realtor.com. "Unfortunately, this comes with a bit of a catch-22, as homeowners who locked in a 30-year fixed rate in the 2 to 3% range don't necessarily want to give that up in exchange for a rate in the 6 to 7% range."

The report also found that sellers have unrealistic expectations for their home sales, with 31% of participants believing that they will get more than their asking price, while 37% expect to have an offer on their property within a week.

This runs counter to other reports, such as Redfin's, which found that in February a record of 13% of homes sales included a price cut and a final sale price below the list price in addition to concessions. 

Realtor.com's recent survey also found that 43% of participants believe they will get their asking price for a property, up from 27% 2022. And 35% of sellers expect buyers to be willing to forgo contingencies like inspections and appraisals to make the deal, up from 30% of participants believing so in 2022. 

The housing market has seen a bit less competition lately and buyers should be attune to this, the survey said.

"Given the changing housing market, it's important for buyers and sellers alike to have realistic expectations heading into a home sale," said Hannah Jones, economic data analyst at Realtor.com. "By understanding the local market, sellers can make sure that they're pricing their home well to help ensure a quick sale and avoid a home that lingers on the market."