Housing and Real Estate statistics taken from the end of December 2023 indicate that the phenomenon of would-be buyers holding off until mortgage rates decline – an effect known as “lock-in” by the industry – has begun to weaken. This suggests that 2024 could see a turnaround from the sluggish pace seen since the twin shocks of inflation and interest rate hikes hit the market.

Redfin reported that the percentage of homeowners whose mortgage rates are below the current average has seen a slight, but noticeable, decrease in only a few short months. In mid-2022, the national percentage of such owners represented 92.8%, a record high. Yet its latest report shows that the percentage has decreased to 88.5%.

This decrease is attributed to a combination of unavoidable factors in the lives of participants – divorces, childbirths, deaths, employment-related relocations – and the market coming to terms with the notion that interest rates are unlikely to return to 3% in the foreseeable future. According to the National Association of Realtors (NAR), while there will likely be a gradual decrease over the course of 2024, the 30-year fixed-rate mortgage rate will likely stay within the mid-6% range for the next year.

The trend of buyers and sellers beginning to drop the lock-in effect is visible in our local market. The latest report from the Huntsville Area Association of Realtors (HAAR) shows an increase in both listings and sales in the Huntsville/Madison County market.

The HAAR report, dated to December 30, 2023, shows that new listings for single-family units saw a 51%, and a 150% increase for townhouse/condo units.

Pending sales of single family units increased 41.7%, while townhouse units saw a 200% increase.

Housing inventory has been an issue for years, both nationally and in our local market, and the lock-in effect has exacerbated the problems with supplying the demand for housing. According to HAAR, the inventory increased for the last week of December, by 11% for single-family units and 14.6% for townhouse units.

The easing of the lock-in effect is corroborated by statistics reported by the US Census Bureau. According to the Bureau, housing starts across the U.S. jumped 14.8% from the previous month to a seasonally adjusted annual rate of 1,560,000 units. Single-family units specifically saw an 18% increase in starts from the previous month.

Redfin reports that national mortgage-purchase applications are up 3% from mid-December, while Realtor.com reports that refinancing activity has surged in the first half of January. The refinance index rose 18.8%, with refinancing of government-backed loans in particular increasing 30%.

It may take some time for the arterial blockage of the lock-in effect to break up entirely. A total or near-total blockage is simply not sustainable over the long-term, a reminder that the market still responds to the needs and lives of the real human beings who participate in it.

The Huntsville Business Journal will continue to monitor market conditions as developments occur.