Home Sellers Sit on Sidelines As Prices Hit Four-Year High

A new report from CoreLogic finds that home prices in May had the highest year-over-year gains in the past four years, up 7.1 percent. Yet, not all homeowners are ready to take advantage of this seller's market.

Frank Nothaft, chief economist for CoreLogic, explains that along with these price gains, higher mortgage rates are tightening the already critical supply of housing, even if they are not tamping down demand. Says Nothaft, "About 50 percent of all existing homeowners had a mortgage rate of 3.75 percent or less. May’s mortgage rates averaged a seven-year high of 4.6 percent," adding that homeowners are more likely to hang onto their lower-rate loans than sell and buy another home with a higher rate, CNBC reports.

The supply of homes for sale has been dropping on an annual basis for the past 36 months, according to the National Association of Realtors. The shortage is most acute at the lower end of the market, where demand is highest and where investors bought thousands of distressed properties during the housing crash, turning them into lucrative rentals. Younger potential buyers have already delayed homeownership due to the recession and high levels of student loan debt. They have also been hampered by high rents, making it more difficult to save for a downpayment.

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