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The Mortgage Lock-In Effect Is Waning as Sellers Flood the Market

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Some segments of the U.S. residential real estate market started to thaw in January after December’s deep freeze, with a growing number of homeowners listing their homes for sale in a sign that the stubborn “lock-in” effect is finally beginning to ease.

The “lock-in effect” refers to homeowners’ reluctance to sell because they have a low mortgage rate and would have to take out a mortgage at a higher rate when they buy a new home.

Even though the 30-year fixed mortgage rates continue to be high, hovering at just below 7%, homeowners seem to have accepted this new normal and are not letting it stop them.

“While rates remain elevated, it is possible that we might be seeing that chiseling effect starting as sellers may grow tired of waiting for significant changes in rates,” says Realtor.com® Chief Economist Danielle Hale in her January monthly housing report.

“Further, while the lock-in effect remains a factor for many sellers, the strength of the effect is gradually waning,” Hale adds.

Realtor.com projects that home sales will rise by 1.5% in 2025, thanks in large part to the passage of time and slowly decreasing mortgage rates chipping away at the lock-in effect that has been hampering home sales for months.

The latest available data shows that newly listed homes were 10.8% up year over year, making it the busiest January in terms of new listing activity since 2021.

What’s more, freshly listed homes shot up 37.5% compared with December, marking the largest month-over-month spike in five years.

“Time and natural turnover could be leading some sellers to make a move this year despite higher rates,” explains Hale.

Looking at the big picture, overall home inventory across the U.S. was up 24.6% compared with the same time last year, a 15th consecutive month of growth. In terms of raw numbers, there were 829,376 active listings in January, plus 314,545 under-contract listings, also known as pending listings.

On a less positive note, Hale pointed out that inventory was still 24.8% down compared with typical 2017 to 2019 pre-pandemic levels.

Buyers are still reluctant to buy

While home sellers are eager to sell, it seems that homebuyers are still hesitant to buy.

The average home lingered unsold for 73 days, making this January the slowest since 2020. Homes spent five days more on the market than last year and three days more than last month.

Eager to entice unenthusiastic homebuyers, 15.6% of sellers slashed asking prices in January, an increase of more than 1% year over year, according to the analysis.

At the same time, the number of homes under contract but not yet sold continued to rebound in January, inching up 1.8% compared with last year, but it is a far cry from December’s impressive 7.4% uptick.

“This slowdown is at least partially due to mortgage rates in January that were on average 25 basis points higher than in December,” according to Hale.

The uptick in smaller listings dampens median price

The national median list price in January was $400,500, which is about $2,000 lower than last month and down 2.2% compared with January 2024.

A closer look at the type of inventory that’s currently available on the market tells a more complex story.

A greater number of smaller homes were listed in January, which softened the median list price year over year. However, it’s important to note that the median list price per square foot grew by 1.2%, signaling that the home values continue to increase.

Plainly put, while the median listing price might have decreased, it’s only because homes with smaller square footage are showing up on the market.

Southern and Western states have the biggest inventory gains

The Western real estate market saw the biggest growth in listings at 31% in January. The South was not too far behind, with home stock increasing by 27.2% since last year.

Similarly to December, the Midwest and Northeast continued to lag behind, with the number of listings in January going up by 16.8% and 7.8%, respectively.

The good news is that the number of homes for sale was up in all of the largest metros compared with 2024, with Denver (+54.8%), Las Vegas (+49.4%), and Tucson, AZ (+45%), putting in the biggest numbers.

When it comes to new listings, the West surged ahead of all other regions, with fresh inventory there growing by 21.7% year over year, followed by 10.7% in the Midwest, 10.6% in the South, and a more modest 4.5% in the Northeast.

In the West and South, where the growth in home inventory has been the most dramatic, the typical home spent five and six more days on the market, respectively, compared with last year.

Meanwhile, in the Midwest, homes lingered just two days longer on the market than in January 2024, and in the Northeast, the number of days homes spent unsold did not change at all from last year.

Read more at Realtor.com

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10 Ways to Reduce Your Housing Costs in Retirement

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Housing accounts for more than a third of an average senior’s spending, according to government data. Specifically, households led by someone age 65 or older spent an average of 35.7% on housing in 2023, the Bureau of Labor Statistics says.

Future retirees may need to budget even more. “Housing costs continue to escalate,” says Matthew Locke, national mortgage sales manager at UMB Bank in Kansas City, Missouri. “Lately, we’ve seen taxes and insurance go up.”

That means even those without a mortgage could see housing costs take a larger bite out of their budget.

To combat rising costs, consider these 10 strategies to save money on housing:

Downsize to a Smaller Home

Moving to a smaller home is one way to save money on housing in retirement. Smaller homes are generally less expensive and have lower tax assessments and reduced heating and cooling costs.

However, it is not free to pack up your belongings and relocate to a new property.

“On average, it costs about 7% to move,” says Jeff Lichtenstein, CEO and broker with Echo Fine Properties in Palm Beach Gardens, Florida. There are costs associated with closing the sale and physically transferring personal possessions to a new location.

What’s more, some states – including Florida and Michigan – cap annual property tax increases for existing homeowners and then adjust tax assessments to reflect the market price after a sale. That means moving out of a long-term residence may not result in significant, or any, tax savings in some situations.

While older Americans may lower expenses by downsizing, they should carefully consider all costs before moving.

Move to a More Affordable Region or Neighborhood

Retirement means the freedom to live anywhere, and seniors may save money by moving away from high-cost states and urban areas.

For instance, they can move from a disaster-prone state, where home insurance costs are surging, to a less expensive part of the country. Or without a daily commute to work, it may make sense to move to an outlying community or neighborhood where homes are farther away from a city core but also less expensive.

As with downsizing, retirees should consider all their costs before committing to a move. For instance, moving into a community with a homeowners association means paying additional fees on top of property tax, insurance and any mortgage payment.

“We try to advise (seniors) that HOA expenses can go up every year,” Locke says.

Refinance Your Mortgage

You may be able to save on housing expenses without moving by refinancing an existing mortgage. Given current rates, this probably wouldn’t result in savings for someone who purchased a home during the 2010s, when mortgage rates were extremely low. But it could be an option for homeowners still paying off an older mortgage.

Those with balances on high-interest credit cards or other loans could also save money by consolidating their debt at a lower rate through a cash-out refinance. However, this only makes sense financially if homeowners are committed to not accumulating new debt.

Tap Into Your Equity

Many retirees have significant equity in their homes, which they can use to create a steady stream of income, access cash to consolidate debt or make home upgrades that will allow them to age in place.

“Reverse mortgages got a really bad rap years ago, but they are much more government-regulated nowadays,” Lichtenstein says.

Homeowners age 62 or older may be eligible for a reverse mortgage, which is commonly set up to provide the owner with monthly payments based on the equity in their home. The catch is that once the homeowner moves out of the property or passes away, the house must be sold to pay off the loan.

A home equity loan or line of credit are two other ways to tap into a home's equity. According to Locke, retirees may qualify for loans based on their retirement income or assets.

Rent Out a Room

Retirees can use their home as a money maker by renting out an unused room. This could be done by finding a permanent roommate or offering your home as a short-term rental through sites such as Airbnb and VRBO. The latter might be an especially good option for those who split their time between two homes and have a property that is unused for several months of the year.

“The extra money you earn can offset home costs and bills to supplement your fixed retirement income,” said personal finance expert and former U.S. News contributor Andrea Woroch in an email.

If having overnight visitors in your home doesn’t sound appealing, Woroch offers these other options that retirees could use to make money with their home.

Rent space in your home or property for special events and photo shoots through Peerspace.

Rent parking spaces via SpotHero, an option that is best for those who live in a popular part of town or near an attraction.

Rent use of your swimming pool or private sports courts through Swimply.

Pet sit in your home using the service Rover.

Become a Renter

Taking into account utilities, lawn care and house repairs, home maintenance can cost thousands of dollars each month. Major components such as the roof, furnace or siding will need to be replaced at some point. However, apartment dwellers can avoid those costs.

“We’ve seen a lot of people who think it’s an easier scenario to sell and move to an apartment,” Locke says.

Depending on what is included with the unit, apartment living can eliminate many ongoing expenses. Apartments may also come with access to pools, gyms or other amenities. There is a monthly payment to rent, though.

“We’ve seen rents go up in most major markets,” Locke cautions.

However, if the price becomes unaffordable, it’s easier to move from an apartment than to sell a house.

Consider a Retirement Community

A retirement community can be another avenue to save on housing expenses. These can be set up in myriad ways, such as with condos, traditional houses or apartments. The community maintains common areas and typically offers some level of amenities. In some cases, meals and transportation may be provided.

Some communities require a hefty upfront entry fee, but in exchange the community may offer amenities that lower a retiree’s ongoing cost of living. Life plan communities, also known as continuing care retirement communities, include various levels of care, and residents may not need to pay much extra to access assisted living or nursing home facilities in the future.

“I think what seniors need to do is talk to other seniors in a community,” Lichtenstein says. “Not just one person – many people.” That can be the best way to determine the true cost of living there and whether a community offers the type of lifestyle that appeals to you.

Pare Down Ongoing Costs

Of course, you don’t need to move to reduce some monthly housing expenses, such as those for utilities, cable TV and phone service. Companies may offer discounts for receiving bills via email or setting up automatic payments.

“Call providers every year to inquire about new promotions that can be applied to your account,” Woroch says. “Otherwise, run a comparison with competitors to see if there are better deals without lowering your services, and be ready to switch if it means saving.”

With homeowner insurance premiums rising rapidly in many areas, bundling home with auto coverage may result in some savings. Increasing the deductible on your policy could also reduce premiums by up to 20%, according to Woroch.

Look for Property Tax Breaks

In Alabama, property owners 65 and older are exempt from paying the state portion of property taxes. Other states, such as Louisiana and New York, will exempt a portion of a home’s value from property tax for income-eligible seniors.

Elsewhere, in states such as Michigan, there is no senior property tax exemption, but older residents can claim an enhanced property tax credit and a home heating credit, among other tax breaks.

Combine Households

Combining households with another family can dramatically reduce housing expenses in retirement. Sharing a home with adult children may be the most common way to achieve this, but you could also live with a sibling, relative or friend.

The key to making these arrangements work is to ensure that each party has a private space within a home and there are clear expectations as to how chores and bills will be split.

Read more at U.S News

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Is The Fed Interest Rate Pause Good For Mortgage Rates?

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The Federal Reserve's first meeting of 2025 concluded this week with a decision that caught few by surprise. After implementing three rate cuts in late 2024, the central bank has opted to keep its benchmark federal funds rate steady at 4.25% to 4.50%. The pause comes as inflation showed signs of stubborn persistence, with the December Consumer Price Index rising to 2.9%, up from a 2.7% reading the month prior.

This move aligned closely with market and analyst expectations. Prior to the January Fed meeting, a FactSet poll noted that more than 90% of economists anticipated that the Fed would hold rates steady at this meeting. The same poll showed that economists widely agree that the Fed will continue to hold on interest rate adjustments at its March meeting. Most analysts now expect that the earliest opportunity for the first benchmark rate cut of 2025 would be the May 7 Fed meeting.

The Fed's decision to pause rates is likely to have immediate effects on consumer borrowing costs. And with the mortgage rate environment still elevated, borrowers may be wondering how mortgage rates, in particular, will respond to the Fed's move. So will the Fed's rate pause be beneficial for mortgage rates, or will other factors continue to drive borrowing costs higher?

Is the Fed interest rate pause good for mortgage rates?

It's important to understand that the Fed's decision to pause rate cuts will not directly impact mortgage rates. Mortgage rates are actually driven by a range of factors, including the Fed's rate changes. This week's Fed rate decision does, however, have a big influence on where mortgage rates could head.

That's because mortgage rates tend to track the 10-year Treasury note yield, which moves based on investor expectations about inflation, Fed policy and economic growth. When the Fed signals that rates will remain steady, it can create more certainty in bond markets, which could help stabilize mortgage rates. If investors interpret the pause as a sign that inflation remains stubborn, though, it could keep Treasury yields higher, maintaining upward pressure on mortgage rates.

One scenario where the Fed pause could benefit mortgage rates is if financial markets perceive the Fed as having done enough to control inflation. For example, if investors believe inflation will continue trending lower without additional rate hikes, demand for government bonds could increase, driving down Treasury yields and, consequently, mortgage rates. This would be a welcome relief for homebuyers who have faced steep borrowing costs in recent years.

On the other hand, if inflation remains persistent and economic data continues to show strength, mortgage rates might not come down meaningfully in the short term. In this case, investors could start to doubt that the Fed will cut rates as early as May, keeping bond yields elevated and limiting any decline in mortgage rates. Or, if the labor market remains tight and consumer spending stays robust, lenders might be hesitant to lower mortgage rates significantly out of fear over continued inflation pressures.

What other factors could impact the mortgage rate environment?

While Fed policy influences the general direction of interest rates, mortgage lenders ultimately set their rates based on various market factors and business considerations. Each lender maintains a unique pricing model and risk assessment criteria, which is why mortgage rates can vary significantly between lenders even on the same day.

The secondary mortgage market also plays a crucial role in determining mortgage rates. Most mortgages are eventually sold to investors through this market, and the pricing of mortgage-backed securities directly influences the rates lenders can offer. For example, when investor demand for these securities is high, lenders can typically offer lower rates. When demand drops or investors require higher yields, though, mortgage rates tend to rise.

Lender capacity and competition can also affect mortgage rates. During periods of high refinance or purchase activity, some lenders might raise rates to manage their pipeline of applications. A lender's operating costs, profit margins and local market competition also factor into their rate-setting decisions, which is why shopping around among different lenders can often lead to better rates for borrowers.

The bottom line

While homebuyers and those looking to refinance may be hopeful that the Fed rate pause will drive down mortgage rates, that's unlikely to happen, at least not in the short term. That doesn't mean mortgage rates will stay stagnant, though. The mortgage rate environment is influenced by multiple complex factors beyond just Fed policy, so while the central bank's decisions play an important role, borrowers should also keep a close eye on inflation trends, Treasury yields and overall economic conditions when trying to gauge where rates might head next.

Read more at CBS News

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Two Resources That Can Help You Buy a Home Right Now

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A recent report from Realtor.com says 20% of Americans don’t think homeownership is achievable. Maybe you feel the same way. With inflation driving up day-to-day expenses, saving enough to buy your first home is more of a challenge. But here’s the thing. With the right resources and help, you can still make it happen.

There are options that can help make buying a home possible today — even if your savings are limited or your credit isn’t perfect. Let’s explore just two of the solutions that could help get you into your first home no matter the market.

1. FHA Loans

If your down payment savings and your credit score aren’t where you want them to be, an FHA loan could be your pathway to buying a home. According to the U.S. Department of Housing and Urban Development (HUD) and Bankrate, the big perks of an FHA home loan are:

Lower Down Payments: They typically require a smaller down payment than conventional loans, sometimes as low as 3.5% of the home’s purchase price.

Lower Credit Score Requirements: They’re designed to help buyers with credit scores that might not qualify for conventional financing. This means, when conventional loans aren’t an option, you may still be able to get an FHA loan.

The first step is to connect with a lender who can help you explore your options and determine if you qualify.

2. Homeownership Assistance Programs

And if you need a more budget-friendly down payment, that’s not your only option. Did you know there are over 2,000 homeownership assistance programs available across the U.S. according to Down Payment Resource? And more than 75% of these programs are designed to help buyers with their down payment. Here’s a bit more information about why these could be such powerful tools for you:

Financial Support: The average benefit for buyers who qualify for down payment assistance is $17,000. And that’s not a small number.

Stackable Benefits: To make it even better, in some cases, you may be able to qualify for multiple programs at once, giving your down payment an even bigger boost.

Rob Chrane, CEO of Down Payment Resource confirms a little-known fact:

“Some of these programs can be layered. And so, in other words, you may not be limited to just one program.”

If you want to learn more or see what you qualify for, be sure to lean on the pros. A trusted real estate agent and a lender can guide you through the process, explain the help that’s out there, and connect you with resources to make buying a home a reality.

Bottom Line

If you’re ready to stop wondering if buying a home is possible and start exploring solutions, connect with an expert agent and trusted lender.

Read more at Keeping Current Matters

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The Rise of the Instagram-Ready Home

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“Home” has become a place to show off on social media. But how do you balance a home that’s designed to envy against one that is also functional for everyday life?

The concept of an "Instagram-ready home" has emerged as a significant trend, reflecting a growing desire among homeowners to create spaces that are not just functional but aesthetically pleasing and primed to share with the world. But Instagram-ready homes are presenting challenges—and opportunities—for architects and builders. They’re finding they must balance aspirational beauty and home experience design—spaces that not only captivate an online audience but also nurture the well-being of those who live in them.

To pull this off requires a thoughtful integration of comfort, functionality and emotional appeal so that the home is as fulfilling in real-life as it is on social media.

Understanding the Instagram Aesthetic

So, what exactly is an Instagram-ready home? Well, it is one where rooms photograph well to show off on social media. On the surface, that may seem simple enough, but this requires a deep understanding of lighting, composition and the interplay between technology and aesthetics. Architects and builders are now being forced to think like photographers and social media influencers, envisioning how each room will translate into a compelling image or video.

To create truly Instagram-worthy spaces, professionals must start with a solid foundation of design principles. Clean lines, balanced proportions and a cohesive color palette also are essential. However, it's the thoughtful incorporation of unique elements that will make a space stand out on social media. This could include statement architectural features, such as dramatic staircases or floor-to-ceiling windows, and carefully curated design elements, like custom artwork or unique furniture pieces.

The Role of Technology in Creating Instagram-Ready Homes

As with many homes today, technology also plays an important role in creating versatile, photogenic spaces. For example, mechanical window shades and tunable lighting systems offer the ability to set different moods and environments within each room, allowing for a variety of aesthetics to be captured and shared. These features not only improve the visual appeal of a space but also provide practical benefits in terms of energy efficiency and comfort, supporting the broader goals of an intuitive home design.

However, these technologies must be hidden from plain view to accommodate the Instagram-ready design and purpose. Televisions that emerge from custom cabinetry or appear as paintings when not in use can help maintain a clean, uncluttered look while still providing real-life entertainment options.

Smart glass that can switch from transparent to opaque at the touch of a button or whisper of a voice command offers privacy and visual interest, perfect for creating Instagram stories or reels, while also enhancing the overall home experience.

Balancing Form and Function

While the goal of creating Instagram-ready spaces is to produce visually stunning environments, functionality of spaces can’t be sacrificed. The challenge for architects and builders lies in creating seamless luxury and modern residential experiences that help homeowners live in harmony with their homes while enabling them to showcase this harmony to the outer world. This means considering how rooms will be used in real life, not just how they will appear in photographs.

For example, an all-white kitchen may look stunning on social media, but it may not be practical for a family with young children. Similarly, open concept living spaces are popular on Instagram but may not suit homeowners who value privacy or separate areas for different activities.

The Impact on Design Process

The rise of Instagram-ready homes has significantly impacted the design and construction process. Architects and builders must now consider how natural and artificial light will interact with spaces throughout the day, ensuring that rooms are photogenic at all times. This may involve strategic placement of windows, the use of reflective surfaces or the incorporation of lighting fixtures that can be easily adjusted for optimal photo opportunities. Certain textures and colors may look different on camera than they do in person, requiring careful consideration and testing during the design phase.

Instagram-ready homes present both challenges and opportunities for the architecture and construction industries. By embracing this trend, professionals can create spaces that are not only visually stunning but also functional, comfortable and truly reflective of the homeowner's lifestyle. The key lies in striking a balance between the desire for shareable, aesthetically pleasing spaces and the fundamental principles of good design that have always been at the heart of architecture and home building.

Read more at NAR

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