According to a CNBC report, low housing inventory is negatively impacting mortgage demand, though a recent drop in home interest rates helped applications recover slightly from March, when applications were down 20%  compared to the same timeframe a year ago.

Mortgage applications at the beginning of March were strikingly at a 28-year low. Part of those decreases can be attributed to higher mortgage rates versus a year ago as well as before the pandemic. According to the Freddie Mac Primary Mortgage Market Survey, rates for 30-year fixed mortgages were 6.28% for the first week of April 2023, 4.72% for the first week of April 2022 and 3.36% just before the declaration of the pandemic in March 2020.

Additionally, the other issue is tight housing inventory. “The lack of housing inventory is a major constraint to rising sales,” said National Association of Realtors (NAR) Chief Economist Lawrence Yun in a prepared statement. “Multiple offers are still occurring on about a third of all listings, and 28% of homes are selling above list price. Limited housing supply is simply not meeting demand nationally.”

New listings also fell 21.8% from a year earlier nationwide during the four weeks ending April 2, one of the biggest drops since the start of the pandemic, contributing to an unseasonal early-spring decline in the total number of homes for sale, according to a Redfin report. The report added that even when homes go up for sale that they tend to get quick offers, so they come off the market quickly. Half of homes that go under contract do so in only a couple of weeks.

A Bankrate report cited activity from institutional investors who have purchased much of the available inventory over the last few years as also contributing to the housing supply shortage.

Home building activity has been low since the start of the Great Recession, according to Federal Reserve Bank of St. Louis data.

Another major issue is that owners of homes who have mortgages at significantly lower rates than those they can get today need a very compelling reason to sell a home with that lower rate than purchase a home with a higher-cost mortgage.

“People will not move unless they have to,” said Doug McCoy, Director of the Indiana University Center on Real Estate Studies, in a recent MReport article. “Ninety-one percent of homeowners have a long-term, fixed-rate mortgage. They are not going to give that up unless they have to, and that’s the lion’s share of the existing housing market.” With remote work more commonplace than before the COVID-19 pandemic, fewer people need to move due to a job change, according to McCoy.

The old rule of thumb that people move on an average every seven years also no longer applies, added Ron Vaimberg, president of Ron Vaimberg International.

With mortgage interest rates expected to stay near their current levels for at least the next several months and new single-family construction expected to grow only modestly as the NAR report predicted, the lack of mortgage listings is expected to continue for some time to come.

“It could take a while for the U.S. to recover from the current housing shortage,” Sean Roberts, a strategic advisor at real estate website Orchard and CEO of home building platform Villa, said in the Bankrate report. “Houses take time and capital to build, plus, there are other factors at play. ​​Unfortunately, there is no short-term solution.”