There's one simple reason why US housing inventory is set to remain low for the foreseeable future

• American homeowners aren't in any rush to buy new houses and move with interest rates rising, and that's contributing to low inventory in the housing market.
• The share of outstanding mortgages financed at less than 3% jumped during the pandemic, said Pantheon Macroeconomics.

With mortgage rates soaring from pandemic-era lows, most American homeowners aren't inclined to pack up and move out of their places – and that's set to keep a lid on inventory, says Pantheon Macroeconomics.

The research consultancy addressed the issue of tight inventory Thursday, with data released from the National Association of Realtors showing a 3.4% fall in existing home sales in April.

"Few signs yet of the long-awaited increase in inventory," Kieran Clancy, senior US economist at Pantheon Macroeconomics, said in a note.

The housing market has been struggling with dwindling inventory in the last year. New home listings in April were down more than 20% from a year ago, according to Realtor.com, with steepening mortgage rates a factor.

Pantheon noted that the share of outstanding mortgages financed at less than 3% jumped during the COVID pandemic, accounting for 24% of the stock at the end of 2022. It also found that about 97% of outstanding mortgages are fixed for 15 years or for 30 years, and 60% are just one to four years old.

"In other words, most existing homeowners are not going to move unless they absolutely have to, due to death, divorce, or an—irresistible—job offer," said Clancy.

"That suggests that existing home supply will remain extremely low for the foreseeable future, depressing the flow of sales and slowing the rate at which existing home prices fall," he wrote.

The 30-year fixed mortgage rate is averaging 6.55%, according to data from the Mortgage Bankers Association on Thursday. Pantheon said mortgage rates were at 3% to 4% before COVID struck. The financing rates plunged to record lows in 2020 and 2021 with the global economy in peril.

The NAR report showed the number of existing homes for sale edged up to the equivalent of 2.9 months of sales but that was below the long-run average, Clancy said. Housing experts usually consider that five to six months of inventory is needed for a balanced real estate market.

"The low level of existing homes for sale is in stark contrast to the new home market, where supply in March was equal to 7.8 months of sales, down from a peak of 10.1 in September but still elevated by past standards," Clancy said.

Existing home sales fell 3.4% to a seasonally adjusted annual rate of 4.28 million and have dropped 23.2% from a year ago, the National Association of Realtors said. Economists, on average, expected a 4.30% annualized rate.