BAM Key Details: 

  • A new Zillow survey reveals the mortgage rate tipping point for homeowners locked into lower rates. Homeowners with rates above 5% are almost twice as likely to sell as those with rates under 5%. 
  • Around 80% of homeowners are locked into mortgage rates below 5%, and about 90% have rates below 6%. Roughly a third are locked into rates lower than 3%. 

How low would mortgage rates have to drop to incentivize sellers to list their homes? 

A new Zillow survey sought to answer that question by asking homeowners whether they planned to sell in the next three years. The results show a tipping point for mortgage holders, based on the rates at which they’re currently locked in. 

After all, it makes sense that a homeowner locked into a 5.50% mortgage rate would be more likely to sell when rates fall below 6.00% than one locked into a rate of 4.50% or lower. 

But which lock-in rate marks the tipping point between homeowners inclined to stay put and those open to making a move in three years or less?

According to Zillow’s survey, mortgage holders who, as of June 2023, have a mortgage rate above 5.00% are almost twice as likely to consider selling within three years than those locked into rates below 5.00%. 

In fact, nearly half (47%) of these homeowners have already put their homes on the market, compared to 20% of those with rates lower than 5.00%. 


Source: Zillow

Homeowners with even lower rates locked in are more reluctant to take on a home purchase with a substantially higher rate. 

The biggest divide in homeowner intent to move sits between homeowners locked into rates of 5.00-5.99% and those with rates of 4.00–4.99%. Forty-one percent of homeowners with rates at 5.00–5.99% intend to sell, compared to only 26% of those with rates at 4.00–4.99%. 

That said, over the past four quarters, that inflection point has varied between 4.00% and 5.00%: 

  • 5.00% for September 2022
  • 4.00% for December 2022
  • 4.00% for March 2023

Taking that into consideration, Zillow puts the true inflection point between 4.00% and 5.00%. 


Source: Zillow

80% of mortgage holders are locked into a rate below 5.00%

Based on Zillow’s survey—and how likely mortgage holders are to transact with the rates they currently have—we can make educated guesses as to the impact of mortgage rates dropping below 6.00% and then 5.00%. Granted, it’s not the only factor in buyer/seller decisions, but it is a significant one. 

According to Zillow’s survey, roughly 80% of mortgage holders have a rate below 5.00%. About 90% are locked into rates below 6.00%. And nearly a third reported a rate below 3.00%. 

With today’s rates near 7.00% for the 30-year fixed, most buyers would need to finance a new home purchase at a substantially higher rate than the one they currently have, increasing their monthly mortgage payment by hundreds of dollars a month. 

It’s no wonder so many homeowners have chosen to stay put rather than move, which helps explain the 28% drop in new for-sale listings in June, compared to a year ago. 

We expect mortgage rates may notch down slightly as inflation comes under control, but they are unlikely to return to 5% in the near future. That means many homeowners will move only for major life events, like a new baby or retirement. Over time, homeowners will likely accept higher rates as the new normal, but until then, the market could remain challenging for home shoppers, who will see fewer options and higher prices.

Orphe Divounguy

Senior economist at Zillow Home Loans

More homeowners plan to sell within three years, compared to a year ago

Zillow’s survey shows almost one-quarter of homeowners (23%) are thinking of selling their home within three years—or they already have their home listed for sale. That’s an 8% increase from the 15% of homeowners who indicated the same a year earlier. 

That share gets even higher with mortgage holders locked into rates above 5.00%. Thirty-eight percent of those say they’re open to selling in the next three years. 

Meanwhile, the current shortage of available homes is driving up prices. According to Zillow’s monthly market report for June, national home values topped $350,000 for the first time, hitting a new national record. Home prices rose in all the 50 most populous metros for the second consecutive month. 

Determined buyers are getting creative 

The one-two punch of higher home prices and high mortgage rates is making it harder for buyers to afford a home purchase, especially since a typical monthly mortgage payment is more than double what it was in 2020—and 13% higher than one year ago.

That said, determined buyers are meeting the challenge by getting creative with their financing. This is one area in which you can help by directing your clients to a mortgage lender you trust—someone who can educate the buyer on options they might not otherwise have considered but that save them a significant amount and make homeownership more financially feasible for them than it otherwise would be.  

One of those options is buying points to lower the mortgage rate and reduce the monthly mortgage payment. Another recent Zillow survey shows 45% of buyers are using this option to make a home purchase more affordable. 

Buyers are also revising their list of future home must-haves and are making compromises to get into a home and start building wealth sooner, rather than waiting for their dream home to appear at a price they can afford. 

They’re also taking advantage of tools and resources developed to improve their understanding of what they can really afford—like mortgage and affordability calculators and Zillow’s new filter that allows them to search by the monthly payment amount. 

Many of today’s buyers can also qualify for down payment assistance programs. Zillow even lists available programs in their for-sale home listings. And a trusted mortgage lender could also help your client identify the programs best suited to their needs. 

Takeaways for real estate agents

Help your buyers explore all the options available to them. And make sure you’re having daily conversations with mortgage lenders in your market, so you’ll know which ones to send clients to if they haven’t already chosen one. 

Those relationships will help you keep up with any developments in the mortgage industry that could help your clients overcome the challenges they face in today’s market. 

Ultimately, it helps to know more people in your market who genuinely care about helping more people become homeowners—as affordably as possible.