Smart Borrower Blog

Low Mortgage Rates Squeeze Housing Inventory

Oct 16th, 2019 @ 9:39 AM by Amber Nelson

Lower mortgage interest rates have increased demand for housing, pushing current market inventory down 2.5% in September, according to That’s a significantly bigger decline than August’s 1.8% decrease. And the housing supply could drop even farther in coming months.

Long-term mortgage interest rates have dropped to 3.5% from 5% just a year ago. That difference has made home buying a much more affordable option for many Americans, if they can find a house that is. First-time home buyers are particularly hard-pressed to find properties in their price range. The number of homes priced below $200,000 has fallen 10% compared with last year. And home builders are not producing many starter homes because of higher costs. Just 10% of new builds are under $200,000 currently.

“We’ve faced what has been called a perfect storm of supply side challenges,” said Robert Dietz, chief economist of the National Association of Home Builders. “There has been an ongoing labor shortage, we lack the necessary land and lots to build homes, we’ve had building material cost concerns, and then probably the most important factor has been higher regulatory costs since the great recession.”

That means builders are mostly constructing homes in the higher price ranges, where there is already the greatest supply of homes. Inventory of homes priced above $750,000 rose 4.7% in September from the previous year. Even the supply of homes in the mid-range and move-up segment – homes prices between $200,000 and $750,000 – has leveled off, after growing for the past 18 months. That inventory – that makes up 60% of the housing market – is predicted to dwindle in the coming months.

The lower mortgage rates have been helpful to homeowners looking to refinance though. Requests for refinance loans rose 4% in the latest week and is up 199% from last year.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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