The Home Buyer’s Quandary: Nobody’s Selling
Kanebridge News
Share Button

The Home Buyer’s Quandary: Nobody’s Selling

Many are ready to move but don’t want to lose the low-rate mortgages they locked in a few years ago, crimping the supply of homes and keeping prices high

By NICOLE FRIEDMAN
Thu, May 11, 2023 8:31amGrey Clock 7 min

Many Americans who want to move are trapped in their homes—locked in by low interest rates they can’t afford to give up.

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.

The mortgage-rate factor is leaving some people in houses that aren’t a good fit, whether it’s a growing family without enough bedrooms or ageing homeowners with too much space, or dissuading people from relocating for jobs or other opportunities. Some people that wanted to sell in 2022 or 2023 shelved their plans.

As current homeowners stay put, “the movement up the ladder is sort of grinding to a halt,” said Sam Khater, chief economist at Freddie Mac. “It’s getting much harder for first-time home buyers to jump into the market because of the lack of supply.”

Half the listings

In April, there were about half as many homes for sale as in April 2019, though there were more listings than in April 2022, when they were near record lows, according to Realtor.com.

The number of homes newly listed on the market in April fell about 21% from a year earlier, an indication that sellers are holding back even during the normally busy spring home-buying season.

The constrained inventory is a key reason why home prices haven’t fallen much, even though higher mortgage rates have pushed many buyers to the sidelines.

The median existing-home sale price in March slid 0.9% from a year earlier, according to the National Association of Realtors. Existing-home sales, meanwhile, fell 22% in March from a year earlier.

It’s a “unique market condition,” said Lawrence Yun, NAR’s chief economist. “Sales are down and even prices are down in some areas, yet from a buyer’s perspective it’s hard to get that home, because they are competing with other buyers.”

Frenzied bidding wars are still common in parts of the country, especially for moderately priced homes that appeal to first-time home buyers. In Clifton, N.J., a New York City suburb, a two-family house that listed for $449,000 in early April received 120 offers in six days, said Mahmoud Ijbara, the real-estate agent who listed it. The house is under contract for about $150,000 over the asking price, he said.

“The low inventory is what’s driving the prices up,” he said. “A lot of buyers are really panicking right now.”

A healthy housing market has between four and six months of supply at current sales rates, economists say. The existing-home market, which makes up most of the housing market, hit a record low 1.6 months’ supply in January 2022 and stood at 2.6 months’ supply in March of this year, according to NAR. The smaller new-home market is more amply supplied, at a seasonally adjusted 7.6 months in March, according to the Commerce Department.

The shortage of supply in the housing market has been a growing issue for years. Following the subprime-mortgage crisis, many builders went out of business and others sharply cut back on spending and new construction.

Mr. Naatz worked while his daughter played nearby. They want to sell and move to a bigger home but don’t want to give up their current low-rate mortgage. TIM GRUBER FOR THE WALL STREET JOURNAL (3)

The problem worsened starting in 2020, when record-low mortgage rates and a pandemic-driven increase in remote work prompted buyers to rush into the market and snap up primary homes, vacation homes and investment properties. Home builders ramped up construction but struggled to meet demand due to volatile material costs, labor shortages and supply-chain issues.

That sales boom, along with a huge wave of homeowners who refinanced their mortgages, locked in millions of homeowners to low-rate, long-term loans. Among people planning to sell their homes and buy new ones in the next 12 months, about 56% plan to wait for rates to decline, according to a Realtor.com survey conducted in February. (News Corp, parent of The Wall Street Journal, operates Realtor.com.)

The Fed has been working to slow inflation. It raised its benchmark federal-funds rate last week for the 10th time since the start of 2022 but signalled it might be done raising rates for now.

Housing is one of the most rate-sensitive economic sectors, and the housing-market slowdown since early 2022 has been one of the main ways that the Fed’s actions have directly affected consumers.

Even some people who can accept higher mortgage rates are staying put because they are struggling to find something to buy. Julie and Aidan Booth expected to live in their three-bedroom home in East Rutherford, N.J., for about five years when they bought it in late 2019. Since then, they’ve had a second child and both switched to fully remote and hybrid working schedules, prompting them to want more space sooner than they expected.

The family started house hunting at the start of the year. They would be able to afford a higher mortgage rate, Mrs. Booth said, but they are stymied by the lack of supply.

“The last three weeks, there has been nothing new in our town” that met their criteria, she said. “There’s just no inventory.”

Opening for builders

The housing scarcity is good news for home builders, who struggled to find customers for much of 2022 with mortgage rates rising but reported stronger-than-expected demand in the first quarter. Newly built homes made up about one-third of total single-family homes for sale in March, up from a historical norm of 10% to 20%.

“If somebody does want a home at [either higher or lower price points], new construction is where they can find it right now,” said Jessica Hansen, vice president of investor relations and communications at D.R. Horton, the biggest home builder by volume, in an April earnings call.

The current market could also be a boon to remodelling companies. Rachael and Aaron Wyley, who have owned their Sacramento, Calif., house for almost 10 years, have considered moving to another house with space for Mrs. Wyley’s mother. But prices were either too high or mortgage rates too steep. Instead, they are saving up to remodel to add an in-law unit.

“We would break down the math of it and look at what we would put down, on top of how much we would get from the house selling,” Mr. Wyley said. “We’d have enough to make the monthly payments but not much else.”

There will always be homeowners who have to move due to life events like death, divorce or job relocations, and others who don’t view current mortgage rates as an obstacle. Many retirees and remote workers opt to move to cheaper housing markets, where lower prices can offset the effect of higher rates. About 38% of owner-occupied housing units have no mortgage, according to Census Bureau data. And about 27% of March existing-home sales were purchased in cash, according to NAR.

Many homeowners who have lived in their houses for years have also built up equity they can use toward down payments on their next homes, reducing the size of their loans. U.S. homeowners had $270,000 more equity on average in the fourth quarter of 2022 than they did at the start of the pandemic, according to CoreLogic.

How long the mortgage rate lock-in effect will last is hard for economists to say. Mortgage rates have never climbed as quickly as they did in 2022.

As the gap widens between homeowners’ existing mortgage rates and the prevailing rate, moving slows down, according to a March working paper by Julia Fonseca at University of Illinois at Urbana-Champaign and Lu Liu at the University of Pennsylvania’s Wharton School. The paper also found homeowners with low locked-in mortgage rates are less likely to relocate for higher-paying jobs.

Ryan and Megan Carrillo bought their first home in Phoenix in 2020 for $320,000, locking in a 2.75% fixed mortgage rate for 30 years.

Last year, after Mr. Carrillo got a higher-paying job, they wanted to upgrade to a nicer house in the $600,000 to $700,000 price range. When they started looking in January 2022, they planned to pay about $3,000 a month for a new house, but they backed out of the market after their expected payments ballooned to more than $4,000 by September.

The Carrillos now plan to stay in their house for about five more years and then turn it into a rental property when they move out of state.

“I’d love to keep it forever and not sell it,” Mr. Carrillo said. His ultra low mortgage rate, he added, is “too good to give up.”



MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

Related Stories
Lifestyle
The Uglification of Everything
By Peggy Noonan 26/04/2024
Money
Personal Wardrobe of the Iconic Late Fashion Designer Vivienne Westwood Goes up for Auction
By CASEY FARMER 25/04/2024
Money
Rediscovered John Lennon Guitar Heads to Auction, Expected to Set Records
By Eric Grossman 24/04/2024
The Uglification of Everything

Artistic culture has taken a repulsive turn. It speaks of a society that hates itself, and hates life.

By Peggy Noonan
Fri, Apr 26, 2024 5 min

I wish to protest the current ugliness. I see it as a continuing trend, “the uglification of everything.” It is coming out of our culture with picked-up speed, and from many media silos, and I don’t like it.

You remember the 1999 movie “The Talented Mr. Ripley,” from the Patricia Highsmith novel. It was fabulous—mysteries, murders, a sociopath scheming his way among high-class expats on the Italian Riviera. The laid-back glamour of Jude Law, the Grace Kelly-ness of Gwyneth Paltrow, who looks like a Vogue magazine cover decided to take a stroll through the streets of 1950s Venice, the truly brilliant acting of Matt Damon, who is so well-liked by audiences I’m not sure we notice anymore what a great actor he is. The director, Anthony Minghella, deliberately showed you pretty shiny things while taking you on a journey to a heart of darkness.

There’s a new version, a streaming series from Netflix, called “Ripley.” I turned to it eagerly and watched with puzzlement. It is unrelievedly ugly. Grimy, gloomy, grim. Tom Ripley is now charmless, a pale and watchful slug slithering through ancient rooms. He isn’t bright, eager, endearing, only predatory. No one would want to know him! Which makes the story make no sense. Again, Ripley is a sociopath, but few could tell because he seemed so sweet and easy. In the original movie, Philip Seymour Hoffman has an unforgettable turn as a jazz-loving, prep-schooled, in-crowd snob. In this version that character is mirthless, genderless, hidden. No one would want to know him either. Marge, the Paltrow role in the movie, is ponderous and plain, like a lost 1970s hippie, which undercuts a small part of the tragedy: Why is the lovely woman so in love with a careless idler who loves no one?

The ugliness seemed a deliberate artistic decision, as did the air of constant menace, as if we all know life is never nice.

I go to the No. 1 program on Netflix this week, “Baby Reindeer.” People speak highly of it. It’s about a stalker and is based on a true story, but she’s stalking a comic so this might be fun. Oh dear, no. It is again unrelievedly bleak. Life is low, plain and homely. No one is ever nice or kind; all human conversation is opaque and halting; work colleagues are cruel and loud. Everyone is emotionally incapable and dumb. No one laughs except for the morbidly obese stalker, who cackles madly. The only attractive person is the transgender girlfriend, who has a pretty smile and smiles a lot, but cries a lot too and is vengeful.

Good drama always makes you think. I thought: Do I want to continue living?

I go to the Daily Mail website, once my guilty pleasure. High jinks of the rich and famous, randy royals, fast cars and movie stars, models and rock stars caught in the drug bust. It was great! But it seems to have taken a turn and is more about crime, grime, human sadness and degradation—child abuse, mothers drowning their babies, “Man murders family, self.” It is less a portal into life’s mindless, undeserved beauty, than a testimony to its horrors.

I go to the new “Cabaret.” Who doesn’t love “Cabaret”? It is dark, witty, painful, glamorous. The music and lyrics have stood the test of time. The story’s backdrop: The soft decadence of Weimar is being replaced by the hard decadence of Nazism.

It is Kander and Ebb’s masterpiece, revived again and again. And this revival is hideous. It is ugly, bizarre, inartistic, fundamentally stupid. Also obscene but in a purposeless way, without meaning.

I had the distinct feeling the producers take their audience to be distracted dopamine addicts with fractured attention spans and no ability to follow a story. They also seemed to have no faith in the story itself, so they went with endless pyrotechnics. This is “Cabaret” for the empty-headed. Everyone screams. The songs are slowed, because you might need a moment to take it in. Almost everyone on stage is weirdly hunched, like a gargoyle, everyone overacts, and all of it is without art.

On the way in, staffers put stickers on the cameras of your phone, “to protect our intellectual property,” as one said.

It isn’t an easy job to make the widely admired Eddie Redmayne unappealing, but by God they did it. As he’s a producer I guess he did it, too. He takes the stage as the Emcee in a purple leather skirt with a small green cone on his head and appears further on as a clown with a machine gun and a weird goth devil. It is all so childish, so plonkingly empty.

Here is something sad about modern artists: They are held back by a lack of limits.

Bob Fosse, the director of the classic 1972 movie version, got to push against society’s limits and Broadway’s and Hollywood’s prohibitions. He pushed hard against what was pushing him, which caused friction; in the heat of that came art. Directors and writers now have nothing to push against because there are no rules or cultural prohibitions, so there’s no friction, everything is left cold, and the art turns in on itself and becomes merely weird.

Fosse famously loved women. No one loves women in this show. When we meet Sally Bowles, in the kind of dress a little girl might put on a doll, with heavy leather boots and harsh, garish makeup, the character doesn’t flirt, doesn’t seduce or charm. She barks and screams, angrily.

Really it is harrowing. At one point Mr. Redmayne dances with a toilet plunger, and a loaf of Italian bread is inserted and removed from his anal cavity. I mentioned this to my friend, who asked if I saw the dancer in the corner masturbating with a copy of what appeared to be “Mein Kampf.”

That’s what I call intellectual property!

In previous iterations the Kit Kat Club was a hypocrisy-free zone, a place of no boundaries, until the bad guys came and it wasn’t. I’m sure the director and producers met in the planning stage and used words like “breakthrough” and “a ‘Cabaret’ for today,” and “we don’t hide the coming cruelty.” But they do hide it by making everything, beginning to end, lifeless and grotesque. No innocence is traduced because no innocence exists.

How could a show be so frantic and outlandish and still be so tedious? It’s almost an achievement.

And for all that there is something smug about it, as if they’re looking down from some great, unearned height.

I left thinking, as I often do now on seeing something made ugly: This is what purgatory is going to be like. And then, no, this is what hell is going to be like—the cackling stalker, the pale sociopath, Eddie Redmayne dancing with a plunger.

Why does it all bother me?

Because even though it isn’t new, uglification is rising and spreading as an artistic attitude, and it can’t be good for us. Because it speaks of self-hatred, and a society that hates itself, and hates life, won’t last. Because it gives those who are young nothing to love and feel soft about. Because we need beauty to keep our morale up.

Because life isn’t merde, in spite of what our entertainment geniuses say.

 

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Related Stories
Lifestyle
The Science-Backed Schedule for Your Perfect Weekend
By ALEX JANIN 08/01/2024
Money
1 In 4 Australians Don’t Have Enough Super Or Assets To Retire
By Bronwyn Allen 07/11/2023
Lifestyle
How an Academic Uncovered One of the Biggest Museum Heists of All Time
By MAX COLCHESTER 24/10/2023
0
    Your Cart
    Your cart is emptyReturn to Shop