Lower Mortgage Rates Unlikely to Ease Competitive Housing Market

Lower mortgage rates don't necessarily make buying a house easier - they tend to increase demand and competition. When rates fall, bidding wars and low inventory often follow.

There's a "lock-in effect" where homeowners with ultra-low rates (below 4%) don't want to give them up by selling, constraining supply. But this alone can't explain limited inventory.

Each 1% drop in rates qualifies 5 million more households for a $400K mortgage. This new demand could outpace any boost in supply from lower rates.

Mortgage rates will likely fall in 2023, but they may not reach the historic lows of the pandemic era for a long time. Deals will still be harder to find than a few years ago.

The housing shortage is a bigger long-term issue than rates. The bottom line is we need more homes, not just more turnover of the same limited housing stock.