SEATTLE, WA — In a housing market grappling with higher mortgage rates, a segment of homeowners stands resilient. According to recent findings from Zillow®, older homeowners, particularly baby boomers in more affordable metros like Pittsburgh, are showing a notable immunity to the deterrent effects of today’s elevated mortgage rates. This group, approximately 10.8 million homeowners nationwide or 13% of the current homeowner population, is less likely to be discouraged from moving due to the financial phenomenon known as “rate lock.”
Rate lock occurs when homeowners, benefiting from mortgage rates lower than the current market rate, are financially motivated to stay put to maintain their favorable rate. However, census data reveals that a significant portion of homeowners are both mortgage-free and possess sufficient income to afford a home at today’s prices. These individuals, often older and residing in less costly markets, are poised to make moves without the constraints of rate lock.
Pittsburgh emerges as a standout city where nearly 38% of Boomer homeowners are free from rate lock, the highest among the nation’s 50 largest metros. This demographic’s mobility is crucial during a time when the housing market suffers from a prolonged shortage of inventory and listings remain significantly below pre-pandemic levels.
Despite some easing of rate lock in recent months, the housing inventory is still about 37% lower than in 2019, exacerbated by homeowners’ reluctance to list amid fluctuating mortgage rates. The Federal Housing Finance Agency highlights that mortgage rate lock-in has potentially prevented around 1.33 million sales between the second quarter of 2022 and the end of 2023.
Owners in more affordable markets, such as the Upper Midwest cities of Pittsburgh, Buffalo, and Cleveland, face fewer barriers. These areas not only have a higher share of homeowners unaffected by rate lock but are also recognized among Zillow’s Hottest Markets for 2024.
The disparity in rate lock impact is stark across generations. Baby boomers, benefiting from substantial home equity and higher average incomes, are the least affected, with 17% being free from rate lock. In contrast, only 6% of millennial homeowners enjoy this freedom, with Gen X homeowners slightly better off at 12%.
The surge in home values, up 41% since the onset of the pandemic, offers a silver lining. Homeowners ready to sell have various options, from traditional real estate channels to immediate cash offers, providing flexibility in navigating the current market dynamics.
This resilience among a segment of homeowners could inject much-needed vitality into the market, offering hope for an increase in available homes for sale. As the landscape evolves, the decisions of these rate lock-immune homeowners will play a pivotal role in shaping the market’s recovery and future trajectory.
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