Oil prices are higher this morning, with WTI trading around $109/barrel. The stock market is lower, and Mortgage Bonds are also down sharply to start the day. Meanwhile, the 10-year Treasury yield continues to push higher, now trading above 4.65%.

As a general rule of thumb, adding roughly 2% to the 10-year Treasury yield puts us close to the current national average mortgage rate environment, which is hovering around 6.75%.

The combination of higher interest rates and rising home values has continued to create a “lock-in effect” for many homeowners. In addition, outdated tax rules are not helping encourage inventory movement.

Currently, homeowners who have lived in their primary residence for 2 out of the last 5 years may qualify for a capital gains exclusion of up to $250,000 for single filers and $500,000 for married couples filing jointly.

Those exclusion limits have not been updated since 1997, despite home values increasing more than 2.5x in many markets over that same period.

There are proposals being discussed that would potentially double those exclusion limits. At present, approximately 15% of homeowners are estimated to have gains above the current thresholds, which becomes yet another reason many homeowners choose not to sell.

Not trying to be Debbie Downer here, but it’s important to take an eyes-wide-open approach.

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