Trapped in Place: Why Millions of Homeowners Can't Sell Their Homes
Download MP3The Locked-In Effect in the Housing Market
One of the biggest hidden risks to the current housing market is that many homeowners are "locked in" due to low mortgage rates. This will significantly impact the market in the next few years more than mortgage rates or home prices themselves.
One of the biggest hidden risks to the current housing market is that many homeowners are "locked in" due to low mortgage rates. This will significantly impact the market in the next few years more than mortgage rates or home prices themselves.
- Homeowners' Low Interest Rates
Homeowners who bought in the last 20 years likely have relatively low interest rates (around 3% to 4%), making them hesitant to sell and buy a new home with higher rates. Many refinanced in recent years to secure these low rates. - Limited Housing Inventory
There is a limited supply of homes available for sale, making it hard for homeowners to find good options to move to. Even if you're looking for a different area or want a change, the houses available might not be in great condition or have the features you're looking for. - Mortgage Rate Considerations
If you’re considering selling and buying a similar house, you may face a higher interest rate (around 7%). This could increase your monthly payments by $1,000 or more, factoring in the mortgage rate, property taxes, and insurance. - Staying Put vs. Moving
Many homeowners are opting to stay in their homes, making improvements instead of moving. The cost of taking on a new mortgage at a higher rate, along with increased property taxes, can make the financial decision to move less appealing. - Impact on Job Mobility
This "locked-in" effect could also limit job mobility. If you need to move to another city for work, you'll face higher mortgage rates and property taxes, making the decision to relocate more costly and difficult. - Property Tax Considerations
When moving to a new house, property taxes could increase, even if the new home is priced similarly to your old one. Be sure to get an estimate from the county before making any decisions. - Long-Term Impact on the Housing Market
This lock-in effect will play a major role in shaping the housing market over the next few years, influencing home prices and the rate of home sales more than many anticipate.
