Matthew's February 2026 Market update

• "Reluctant Landlords" selling rental properties they never expected to hold.
• Buyers have 10% more buying power at today's 6% rates vs. 7% last year
• Inventory is slowly unlocking:  move-up buyers returning to the market.

 With interest rates bouncing a little below 6% this week, I'm pointing out to my prospective home buyers that this translates into 10% more home purchasing power compared to the 7% rates we had a year ago. Sure, it's not the 3-4% rates of the early 2020s, but those are in the past, and realistically the likelihood of ever getting there again is low.  But, 5% is realistic, and some buyers are making the choice to buy at around 6% with the hope (nothing's guaranteed!) that they will be able to refinance to 5% or less in the future.   This same optimistic philosophy is driving more "move-up" buyers back into the marketplace this year.  Having felt trapped in their low interest rate home, and unable to rationalize the costs of moving to a more fitting home, many simply stayed put for the past few years.  But, data shows fewer and fewer owners holding on to those cherished low interest rates.  Ultimately, in many cases, a life event such as an expanding family or a divorce rendered the financial consideration of staying put secondary.  As the chart below shows, more owners now have a rate of 6% or higher than those with 3% or lower, which is a big turnaround from just a couple of years ago.

This low interest rate environment of the early 2020s created another real estate phenomenon:  the accidental or "reluctant landlord".   When rates were 3% and lower, many move-up buyers elected not to sell their down-leg property, but rather rent it out.  This caused further constraint on the supply side of the equation as buyers typically sell a home, creating no net effect on inventory, but not these fortunate folks.   Many decided to rent out their old home and buy a more suitable home (often pulling equity from the old home).  Some had never been a landlord, which can be an eye-opening experience and isn't always the financial windfall it's cracked up to be.  For many, holding on a home has proven to be a great financial move with prices rising drastically in recent years.  However, I'm seeing more and more of these down-leg homes come on the market recently.  In addition to the challenges of being a landlord (especially in cases where the move took the owners out of state), many owners are nearing the end of their "2 out of 5" rule, where they can benefit from a big capital gains tax exclusion provided they lived in the home for 2 of the past 5 years (i.e they've been gone less than 3 years).

If any of this sounds familiar and you'd like to talk about your move-up purchase, or maybe you're a "reluctant landlord" reconsidering things, let's sit down and run all the numbers.  

Until next time,

Matthew

949 677 3618

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