The housing market will see a flood of inventory once mortgage rates hit 5%, according to Compass CEO Robert Reffkin.
Inventory is tight now as 70% of homeowners are locked into mortgage rates below 4%, leaving many hesitant to sell.
The average rate on the 30-year fixed mortgage slipped to 6.67% the past week.
A flood of housing inventory could hit the market if mortgage rates drop to a key level, according to Compass CEO Robert Reffkin.
For now, inventory remains tight as 70% of homeowners are locked into mortgage rates below 4%, he told CNBC on Tuesday, leaving many hesitant to sell.
“The issue we are seeing is that we need to have an unlock of inventory. It’s probably going to happen when mortgage rates get to 5, 5.5% in a sustainable level. At that point, I would expect there to be a flood of inventory in the market, and it’ll feel like the pandemic craze all over again,” Reffkin said.
The average 30-year fixed mortgage rate was at 6.67% this week, still hovering close to a 20-year high.
Because many homeowners are looking to cling onto the lower rates at which they financed their home years ago, demand has far outstripped supply, Reffkin said, with more homebuyers now opting to purchase newly constructed homes instead of existing homes.
And experts don’t expect mortgage rates to ease significantly anytime soon, as the cost of borrowing in the housing market is influenced by the Federal Reserve’s monetary policy.
Fed officials have aggressively raised interest rates over 1,700% in the past year to lower inflation, and recently suggested rates could go even higher and stay at elevated levels as high prices remain a threat.
Markets are pricing in an 82% chance the Fed will raise rates another 25 basis points at their next policy meeting, per the CME FedWatch tool.
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