- The housing market looks to be gradually approaching a recovery.
- A growing number of mortgage-locked homes are going up for sale, JPMorgan said.
- Existing home sales, meanwhile, jumped nearly 10% in February.
The housing market looks like it's starting to thaw, thanks to a growing number of mortgage-locked sellers who are opting to put their homes on the market anyway, according to JPMorgan Asset Management.
The bank pointed to the "mortgage lock-in" effect, a phenomenon where existing homeowners are hesitant to sell their properties because they're looking to cling onto the lower rates at which they financed their homes years ago. That reluctance slowed housing activity for most of 2023, with home sales plunging 18.3% last year, according to Redfin.
But home sales have ticked higher in recent months — a sign that the lock-in effect could be easing its grip on prospective sellers, the bank said. Existing home sales jumped 9.5% in February, while existing home inventory rose 5.9% from the prior month, according to data from the National Association of Realtors.
Homeowners could now be more willing to dip into the housing market, as many are realizing high mortgage rates aren't going away anytime soon, real estate economists have said. That's adding some much-needed inventory to the market, which is also being supplemented by a new housing supply in the works: There are around 1.6 million homes currently being constructed, JPMorgan estimated. Meanwhile, housing completions jumped to 1.7 million in February, 15.6% higher than what they were last year, Census data shows.
"The housing sector was one of the hardest hit areas of the economy when the Fed began raising rates, but there are signs activity has turned a corner, JPMorgan strategist Stephanie Aliaga said in a note on Thursday.
That spells good news for homebuyers, who have been challenged by the imbalance of supply and demand for the last few years. Buyers have fewer options than they did in the past, and the lack of inventory has also pushed up home prices, with the median US home costing $412,227 in February, Redfin data shows.
Still, a recovery for the housing market will likely be "gradual," Aliaga said — similar to the view of other real estate economists, who say that it could take years for supply to fully catch up with demand. Researchers from the Federal Housing Finance Agency recently warned that the mortgage lock-in effect could linger for years to come, barring a sudden drop in mortgage rates.