HousingWire Daily Mike Simonsen on what happens to inventory if rates fall
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Aug 4, 2025 In this discussion, Mike Simonsen, Chief Economist at Compass, unpacks the impact of falling mortgage rates on housing inventory. He reveals how lower rates might not benefit homeowners as expected and explores buyer and seller behavior in this evolving market. The conversation dives into regional differences, particularly in California and the Northeast, highlighting migration patterns and their influence on inventory. Simonsen also critiques rising home price reductions and the complexities of pending sales as interest rates fluctuate.
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Falling Rates Lower Inventory
- If mortgage rates fall, buyers will be unlocked faster than sellers, causing inventory to decrease.
- This scenario puts a floor on home prices rather than increasing price pressure through higher inventory.
Inventory's Impact on Prices
- Inventory has risen to a level sufficient to impact prices if demand weakens.
- We may soon see sales increase slightly while home prices begin to decline in many areas.
Seller Buyer Overlap Limits Inventory
- Most sellers are also buyers, so new inventory mostly comes from unique groups like investors or retirees.
- Falling rates primarily encourage these groups to transact faster, increasing demand before additional supply appears.