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How far must mortgage rates fall to increase inventory? Here’s what experts say
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While the inflation rate is down compared to recent highs, persistent inflation is continuing to impact many people’s wallets, as the cost of everything from gas and food to housing has increased substantially over the last couple of years. To combat it, the Federal Reserve has kept its benchmark rate paused at a 23-year high.
As a result, today’s mortgage rates are much higher than they were in 2020 and 2021 during the height of the pandemic. This has led to many existing homeowners remaining in their homes to keep their sub-3% mortgage rates rather than moving and buying a home at a higher rate. Despite this, housing inventory grew by 1.21 million units in April, according to data from the National Association of Realtors. However, inventory is still lower than it was before the COVID-19 pandemic.
But could a drop in mortgage rates encourage existing homeowners and further increase housing inventory? Here’s what to know.
Find out what today’s top mortgage rates are here.
How far must mortgage rates fall to increase inventory? Here’s what experts say
According to some experts, mortgage rates need to drop at least 1% to 2% from today’s rates — which currently hover near 7% on average — to encourage existing homeowners to sell their homes and increase inventory.
“If mortgage rates began to steadily fall to 6% or lower, a cache of homeowners could be released from the lock-in effect created by the lower-than-normal mortgage rates seen during the pandemic,” says Kate Kaminski, COO of Walton Global.
Mortgage rates would likely have to fall below 5% to see any significant movement in housing inventory, says Michelle White, national mortgage expert at The CE Shop, an online educational resource for real estate and mortgage professionals.
Brian Durham, vice president of risk management and managing broker at Realty Group LLC and Realty Group Premier, agrees.
“To get existing homeowners to move away from the 4% mortgages they currently have, I believe rates would need to fall to 5%,” says Durham.
Ready to buy a home? Compare mortgage rates and start the preapproval process here.
Other factors that could impact housing inventory
Other factors could also help to spark an increase in inventory, experts say, including:
Delinquency rates
White says we could see an uptick in inventory if the recent delinquency rates lead to wider foreclosures.
“Some analysts are now suggesting that the looser underwriting requirements of non-QM loan originations in 2022 are contributing to the uptick in delinquency rates in 2023 and 2024,” says White. “Those non-QM loan pools that investors bought are not performing well.”
Because of those factors, White thinks another foreclosure crisis could be possible. And, if that happens, there could be an increase in homes for sale and a decrease in rentals, says White.
Mortgage rate stabilization
Richard Ross, CEO of Quinn Residences, believes that a decline in rates wouldn’t help to increase inventory as much as a stabilization in rates could.
“I believe that it’s not necessarily the current level of rates, but rather that people need to feel that rates have stabilized and will not be as volatile as they have been recently, ” says Ross.
The days of below 5% mortgage rates are over, Ross says. And if homeowners come to this same conclusion, that will likely open up the inventory floodgates.
New home construction
Durham says an increase in new construction may be the most significant factor in terms of increasing housing inventory.
“For that to happen, we will need to see more local and state governments easing regulations and providing tax incentives to some of the fears builders have regarding the economy,” Durham says. “This should specifically target affordable home building and not just higher-end home production.”
New construction is a major factor, Kaminski says, noting that there has already been a shift within new constriction as the supply of existing homes has become constrained.
“New home construction is essential to bridge the national housing deficit left behind due to underbuilding over the last two decades,” says Kaminski. “New home construction now makes up over 31% of all homes for sale, and historically this number has been closer to 13%.”
The bottom line
Mortgage rates might need to fall by at least 2% to increase inventory, some experts say. However, there may be other factors, such as new construction and delinquency rates, that could also play a key role.
“A significant surge in inventory levels could help bring stability to the market by providing more options for homebuyers, reducing home prices, and simply balancing the supply and demand scale,” Kaminski says.
That said, if you’re in the market for a home, you don’t necessarily have to wait for rates to fall to get a mortgage rate under 7%. For example, applying for a 15-year mortgage could be one way to obtain a lower mortgage rate, but only if you can afford the higher monthly payments that come with them. And, keep in mind that comparing rates and fees from at least three to five lenders could help you get the best rate for your unique circumstances.
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Actor Danny Masterson, who is serving a sentence of 30 years to life in prison, is seeking to overturn his conviction for the rape of two women, with his attorneys arguing he did not receive a fair trial.
A Los Angeles jury found Masterson guilty last year of two counts of rape by force or fear for assaulting two women at his Hollywood Hills home in separate incidents in 2003 — during the same time he was starring on the Fox TV’s “That ’70s Show.” The jury deadlocked on the case involving a third alleged victim. The May 2023 trial followed a mistrial in November 2022.
Masterson, 48, is incarcerated at California Men’s Colony, a minimum- and medium-security prison in San Luis Obispo County.
Cliff Gardner, the attorney handling Masterson’s appeal, filed an appellant’s opening brief Tuesday that alleges witnesses told different versions of their stories over time. The brief also argues that evidence that would have helped Masterson’s defense was not presented due to what Gardner describes as erroneous rulings by the court. Gardner argues in the court filings that those factors support reversing the convictions.
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Masterson’s defense argued at trial that he knew both women socially and his sexual relations with them were consensual.
“It is true, of course, that a defendant is not entitled to a perfect trial. He is, however, still entitled to a fair one,” the brief reads. “Danny Masterson received neither. Reversal is required.”
During the trial, one of the women Masterson was later convicted of raping broke down on the witness stand as she testified that he choked her and smothered her with a pillow when she tried fighting back as he assaulted her, according to the Associated Press.
“I could not breathe,” she said, crying.
When the prosecutor asked what she was thinking at the time, she said she feared for her life, AP reported.
“That he was going to kill me,” she said. “That I was going to die.”
She later testified Masterson took out a gun from inside his bedside table and told her to be quiet when they heard voices at the door. She told jurors she was in and out of consciousness through the night.
Masterson and the victims were members of the Church of Scientology, which became a central focus of the case as the women alleged they were stalked and harassed after reporting the allegations to police.
They sued Masterson and the church years earlier in connection with those accusations.
During the trial, Deputy District Attorney Reinhold Mueller told jurors the church had retaliated against the victims for reporting the the crimes — the rape of a 28-year-old woman in April 2003 and assault of a 23-year-old woman, also that year.
“What happened after they were drugged, they were raped by this man over here,” Mueller said, as he pointed across the courtroom toward Masterson during closing arguments. “You have an opportunity to show there is justice. It does exist.”
The church released a statement at the time refuting the allegations.
“The church has no policy prohibiting or discouraging members from reporting criminal conduct of anyone, Scientologists or not, to law enforcement,” the statement reads. “Quite the opposite, church policy explicitly demands Scientologists abide by all laws of the land. All allegations to the contrary are totally false.”
In the newly filed brief for Masterson’s appeal, Gardner alleges the victims changed their stories “dramatically” over the years and had a financial motive to do so. Gardner argues in court documents that though the statute of limitations to file a lawsuit seeking damages had expired before the trial, under state law it would be revived if Masterson was convicted of forcible rape involving multiple victims.
Gardner says in the brief that a court ruling prevented evidence related to that argument from being admitted at trial.
He also states in the court filings that some witnesses died before the case went to trial, more than a decade after being reported to law enforcement, and alleges that police lost a tape-recorded witness interview that would have helped Masterson’s defense.
After the six-day trial resulting in Masterson’s convictions, one of the women he was convicted of raping released a statement saying she was relieved he had been found guilty.
“I am experiencing a complex array of emotions – relief, exhaustion, strength, sadness – knowing that my abuser, Danny Masterson, will face accountability for his criminal behavior,” said a statement from one of the women whom Masterson was convicted of raping at his home in 2003.
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