JPMorgan says the housing market is thawing as more 'button-down locked' homes start to sell

• The real estate market seems to be coming back to life.

• JPMorgan says that more and more homes are being sold on the buttresses.

• Meanwhile, home sales jumped nearly 10% in February.

The real estate market looks like it is beginning to thaw as more sellers locked in to charge-off loans choose to put their homes on the market, according to JPMorgan Asset Management.

The bank pointed to the "mortgage lock-in" effect, a reluctance by existing homeowners to sell their properties because they want to capitalize on the opportunity to finance at lower rates years ago. That reluctance has slowed housing activity through much of 2023, with home sales plummeting 18.31 TP3T last year, according to Redfin.

But home sales have risen in recent months, suggesting that the lock-in effect on potential sellers may be easing. According to the National Association of Realtors, home sales jumped 9.51 TP3T in February, while inventory rose 5.91 TP3T from the previous month.

Homeowners may now be more willing to dip their toes into the property market as many realize that high mortgage rates are not going away anytime soon, according to real estate economists. This has added some much-needed inventory to the market, and the supply of new housing is being replenished: JPMorgan estimates that about 1.6 million homes are currently under construction. Meanwhile, Census data show that housing completions jumped to 1.7 million in February, 15.6% higher than the same month last year.

The real estate sector was one of the hardest hit areas of the economy when the Fed began raising interest rates, but there are signs that activity in the sector has turned around," Stephanie Aliaga, a strategist at JPMorgan, said in a report Thursday.

This is good news for home buyers, who have been challenged by the supply-demand imbalance over the past few years, as Redfin data shows that buyers have fewer choices than in the past, and the lack of inventory has pushed up the price of homes, with the median price of a U.S. home at $412,227 in February.

But the housing market's resurgence is likely to be "gradual," Arriaga said, echoing other real estate economists who say it could take years for supply to fully catch up with demand. Researchers at the Federal Housing Finance Agency recently warned that the mortgage lock-in effect could last for years, unless mortgage rates fall suddenly.

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