of silver tsunamior the expected increase in the number of houses on the market as the number of baby boomers decreases, may be slowed by the golden handcuffs.
New York Times reported on Monday since late last year, there was more than a 3% difference between new home loan rates and the average fixed rate on existing loans.
About 70% of homeowners had mortgage rates of about 4%, according to recentlywhich is significantly lower than the current market rate of around 7%.
The gap between the current rate and the average prompts homeowners to hold on to their properties, closing them with “golden handcuffs” or a financial reason to stay.
The effect is visible: Federal Housing Finance Agency found that the mortgage rate freeze halted sales of 1.33 million homes from mid-2022 to the end of 2023, reducing home sales by 57%. The lack of supply, combined with population growth outstripping construction, has led to a shortfall of 7.2 million homes, for broker assessments.
Boomers, who were expected to start downsizing their living spaces since this year and flooding the housing market with homes in a tsunami of silver, are instead holding on to their larger residences.
“We just don't want to pay that much in interest,” said finance professor Bob Wood, 66 CNBC. Wood and his wife are in the 10th year of a 15-year 3.125% fixed mortgage on their 5,000-square-foot home in Alabama.
Another couple, both over 70 and empty nesters, said CNN Business that they're “staying put” in their 3,000-square-foot, 5-bedroom home in California.
Connected: Barbara Corcoran says 'Now is the best time' to buy as house prices will soon go 'through the roof'
or Realtor survey from last year showed that 82% of homeowners who wanted to sell their existing home and buy a new one felt stuck in keeping their homes because of the change in mortgage rates. More than half said they were waiting for rates to drop before selling.
“One positive that came out of the pandemic was historically low mortgage rates – and many people took advantage of this opportunity to buy their first home, upgrade to a more expensive home or refinance the home they were in. ,” said the Realtor's Chief Economist. Danielle Hale on the report. “Unfortunately, this comes with a small catch-22, as homeowners who locked in a 30-year fixed rate in the 2-3% range don't necessarily want to give that up in exchange for a rate in the 6-7% range.” .”
Foreclosed homeowners were also less willing to relocate for work, according to Bloomberg emphasizing Last week, Midwest-based managerial recruits were turning down jobs in the South with salaries of $250,000, in part to keep their low-interest mortgages.
Connected: Barbara Corcoran Sounds Off on NAR Settlement: “It's a Scary Time for Real Estate Agents”