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The Housing Market Has Cooled, But It’s Not Frozen
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Let’s say you would like to move but you’re handcuffed to your house by a low mortgage rate. If you move now, you’ll have to pay a much higher interest rate on your next home loan.
Sound familiar? It’s a situation that millions of Americans find themselves in. This chart, which I made using data supplied by Nancy Vanden Houten, the lead U.S. economist at Oxford Economics, shows the opening of a huge gap since the end of 2021 between rates on new 30-year mortgages and old loans — the stock of outstanding mortgage debt.
reported on Tuesday. “The share of new homes in total home sales has risen to 13 percent from about 10 percent over the summer, and likely will rise a bit further in the months ahead,” Kieran Clancy, the senior U.S. economist at Pantheon Macroeconomics, wrote in a note to clients.
People who were lucky enough to take out a 30-year fixed-rate mortgage in December 2020 got an average rate under 2.7 percent, according to Freddie Mac, the mortgage securitizer. The national average is now around 6.4 percent. Given those changes, “unless you’re a person who needs to make a move, there’s little incentive” to move now, Vanden Houten told me.
Of course, some people still are putting their homes on the market, and Vanden Houten herself was recently one of them. She sold a house in Teaneck, N.J., to move to Tucson, Ariz. She had an adjustable-rate loan on her New Jersey home, so the rate shock from moving wasn’t as big as it might have been. In any case, she said, “I’ve always loved the desert. I didn’t move for purely financial reasons.”
Vanden Houten has company. Jessica Lautz, the deputy chief economist at the National Association of Realtors, told me that the inventory of existing homes for sale, while historically low, is nonetheless up about 5 percent from a year ago.
“A lot of people have earned a substantial amount of housing equity,” Lautz said. “Even if they have low interest rates on their current loans, they may be willing to make a trade because they’re paying all cash for the next property.”
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