Many Americans "Trapped" in Current Homes by Low Interest Rates
New York, NY, May 10, 2023-"Many Americans who want to move are trapped in their homes-locked in by low interest rates they can’t afford to give up,” reports the Wall Street Journal.
“These ‘golden handcuffs’ are keeping the supply of homes for sale unusually low and making the market more competitive and pricey than some forecasters expected.
“The reluctance of homeowners to sell differentiates the current housing market from past downturns and could keep home prices from falling significantly on a national basis, economists say. This could dull the Federal Reserve’s efforts to slow inflation by cooling the economy.
“Emily and Isaac Naatz of Cottage Grove, Minn, a suburb of St. Paul, had a baby last year and want a bigger place. They have lived for more than four years in their two-bedroom townhouse, and they now want a three- or four-bedroom house with a yard and space for a home office. “‘You get four people in here…and it feels like a large crowd,’ Mr. Naatz said.
“But they locked in a 30-year fixed mortgage rate of 3.4% in 2021-and don’t want to give that up to take on a new mortgage with a rate about 3 percentage points higher, especially when home prices in their area haven’t come down much.
“The type of home they would want to buy would cost them about $1,100 a month more than they currently pay, Mr. Naatz said. ‘I don’t feel comfortable paying what I still think is an inflated price for a home, and on top of it paying twice the interest rate,’ he said.
“As of March 31, nearly two-thirds of primary mortgages had an interest rate below 4%, according to mortgage-data firm Black Knight. About 73% of primary mortgages have fixed rates for 30 years, Black Knight data show. The average rate for a new 30-year fixed mortgage was 6.39% in the week ended May 4, according to Freddie Mac.”