A Huge Number of Homeowners Have Mortgage Rates Too Good to Give Up – The New York Times

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On a scale not seen in decades, many Americans are stuck in homes they would rather leave.

Something deeply unusual has happened in the American housing market over the last two years, as mortgage rates have risen to around 7 percent.


Buy/sell, rent/lease residential &
commercials real estate properties.

Rates that high are not, by themselves, historically remarkable. The trouble is that the average American household with a mortgage is sitting on a fixed rate that’s a whopping three points lower.

Source: Federal Housing Finance Agency analysis. Note: New loan figures show the predicted rate that existing mortgage holders could get on the same mortgages at new market conditions.

The gap that has jumped open between these two lines has created a nationwide lock-in effect — paralyzing people in homes they may wish to leave — on a scale not seen in decades. For homeowners not looking to move anytime soon, the low rates they secured during the pandemic will benefit them for years to come. But for many others, those rates have become a complication, disrupting both household decisions and the housing market as a whole.

Indeed, according to new research from economists at the Federal Housing Finance Agency, this lock-in effect is responsible for about 1.3 million fewer home sales in America during the run-up in rates from the spring of 2022 through the end of 2023. That’s a startling number in a nation where around five million homes sell annually in more normal times — most of those to people who already own.

These locked-in households haven’t relocated for better jobs or higher pay, and haven’t been able to downsize or acquire more space. They also haven’t opened up homes for first-time buyers. And that’s driven up prices and gummed up the market.

Share of existing mortgages with rates below or above new market rates

Percentage point difference from rates on new mortgages BELOW
-3
-2
-1
0
+1
+2
+3
ABOVE

Federal Housing Finance Agency analysis. Note: Data covers all fixed-rate mortgages in the U.S.

Distribution of fixed rates held by existing mortgage holders
1999
Before the dot-com recession
2005
During the housing boom
2011
Emerging from the Great Recession
2019
On the eve of the pandemic
2023
Post-pandemic

Source: Federal Housing Finance Agency analysis. Note: Data shown captures the fourth quarter of each year.

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