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Rising Rates, Growing Inventory: Is Boise Debunking the Mortgage Rate Lockdown Theory

The housing market is a dynamic system, and understanding its current trends requires examining various factors. Let’s dive into the “mortgage rate lockdown theory” and explore data suggesting inventory is increasing despite rising mortgage rates.

Challenging the Prevailing Narrative:

The theory proposes that high mortgage rates deter existing homeowners from selling, effectively locking them into their historically low rates. However, recent data appears to contradict this notion.

Inventory on the Rise:

  • Year-over-year comparison: Inventory in February 2024 shows a significant year-over-year increase compared to 2023, despite higher mortgage rates. This trend suggests that sellers are entering the market even with less favorable borrowing conditions.
  • Seasonal influence: Historically, inventory increases during the spring season. While 2024 listings haven’t reached expectations yet, the upcoming spring season is likely to see a natural surge in new listings.

New Listings and Price Cuts:

  • New listings: According to data from the Intermountain MLS, new listings for February 2024 are up 16% from February 2023. This indicates a potential shift in seller behavior as we enter the spring selling season.
  • Price cuts: The percentage of homes receiving price cuts is slightly lower than in 2023, reflecting the resiliency of the Boise market in terms of demand. Continued volatility with mortgage rates could see a return of a higher percentage of price cuts, but for now they are within historical norms.

Weekly Boise Market Tracker:

  • New Listings:  The market saw a large jump in new listings this week, up 24% from the week prior. The spring market appears to be in full swing here in Boise, even if the weather doesn’t agree.
  • New Sold: The number of sold homes rose even more dramatically than new listings, up 45% from the week before. Keep in mind, this is a trailing data point as transactions generally take approximately 30 days to close.
  • Price Changes: So far this calendar year, price changes have remained fairly steady. This last week saw a small reduction of total price changes, but still within norms.

The Interplay of Interest Rates and the 10-Year Yield:

  • Mortgage rates and the 10-year yield: The interplay between labor and inflation data continues to cause havok with the 10-year yield. Volatility in either dataset will affect the tone and direction of future Fed meetings and, ultimately influence mortgage rates. Based on current modeling, mortgage rates should stay between 5.75% -7.25% for the remainder of the year.
  • Impact on purchase applications: Rising rates have indeed impacted purchase applications, leading to five consecutive weeks of negative data. This indicates a slowdown in buyer demand compared to the period with decreasing rates.

Looking Ahead: The Significance of the Jobs Report:

  • Focus on labor data: This week’s jobs report will be influential. Strong labor market data will keep the 10-year yield and, consequently, mortgage rates within the predicted range. This, in turn, could influence future inventory and sales trends.

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