Fleming: According to Fannie Mae's Home Purchase Sentiment Index, consumer sentiment about the housing market has slipped from an all-time high in June. Buying sentiment is declining because of rising prices and reduced purchasing power, but selling sentiment is also declining. Existing homeowners are concerned about selling their homes for fear of not finding something to buy.

GlobeSt.com: Are current homeowners becoming more or less likely to list their homes as prices rise?

Fleming: Rising home prices are not the primary dynamic preventing existing homeowners from listing their homes for sale. Rising rates are the more influential dynamic. As rates rise, the mortgage rate on the home purchased is higher than the mortgage rate on the home sold, which creates a disincentive to move. The more rates rise and the larger one's loan, the more costs increase. The rate locked-in cost will grow as rates rise and may prevent existing homeowners from listing their home and adding to the inventory of homes for sale.

GlobeSt.com: When they do list, are they more often upgrading or downsizing?

Fleming: In many cases, it's both. Upgrading location and amenities, while downsizing the physical size. This is one reason for the resurgence of many urban areas, as demand for urban amenities are popular for older home buyers.

GlobeSt.com: What else should our readers know about existing homeowners and the housing stock?

Fleming: The challenges that existing homeowners face in the housing market today may get worse before they get better. Rising rates will increase the cost of moving and the concern about not finding something to buy will continue until more new housing units can be added to the overall housing stock.

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SANTA ANA, CA—Rising home prices are not the primary dynamic preventing existing homeowners from listing their homes for sale, First American Financial Corp.'s chief economist Mark Fleming tells GlobeSt.com. Fleming says, according to the firm's latest Real Estate Sentiment Index (RESI), “one critical reason for the supply constraint is that existing homeowners are unwilling to list their homes for sale for fear of not being able to find something to buy.”

He adds that rising interest rates and rapid price appreciation driven by the lack of supply caused affordability to decline in July. “Based on our RHPI, affordability has declined by more than 10% over the last year. But, the loss in affordability is only significant to potential first-time buyers. Existing homeowners with fixed-rate mortgages benefited from the rising prices with increased equity. Your perspective on rising home prices and affordability largely depends on whether you are a homeowner or not.”

We spoke with Fleming about current homeowners' view of the housing market and the factors that are currently preventing them from listing their homes.

GlobeSt.com: How are current homeowners viewing the housing market in general?

Fleming: According to Fannie Mae's Home Purchase Sentiment Index, consumer sentiment about the housing market has slipped from an all-time high in June. Buying sentiment is declining because of rising prices and reduced purchasing power, but selling sentiment is also declining. Existing homeowners are concerned about selling their homes for fear of not finding something to buy.

GlobeSt.com: Are current homeowners becoming more or less likely to list their homes as prices rise?

Fleming: Rising home prices are not the primary dynamic preventing existing homeowners from listing their homes for sale. Rising rates are the more influential dynamic. As rates rise, the mortgage rate on the home purchased is higher than the mortgage rate on the home sold, which creates a disincentive to move. The more rates rise and the larger one's loan, the more costs increase. The rate locked-in cost will grow as rates rise and may prevent existing homeowners from listing their home and adding to the inventory of homes for sale.

GlobeSt.com: When they do list, are they more often upgrading or downsizing?

Fleming: In many cases, it's both. Upgrading location and amenities, while downsizing the physical size. This is one reason for the resurgence of many urban areas, as demand for urban amenities are popular for older home buyers.

GlobeSt.com: What else should our readers know about existing homeowners and the housing stock?

Fleming: The challenges that existing homeowners face in the housing market today may get worse before they get better. Rising rates will increase the cost of moving and the concern about not finding something to buy will continue until more new housing units can be added to the overall housing stock.