Squeezed by high interest rates and record prices, homeowners are frozen in place. They can’t sell. So first-time buyers can’t buy.
If buying a home is an inexorable part of the American dream, so is the next step: eventually selling that home and using the equity to trade up to something bigger.
But over the past two years, this upward mobility has stalled as buyers and sellers have been pummeled by three colliding forces: the highest borrowing rates in nearly two decades, a crippling shortage of inventory, and a surge in home prices to a median of $434,000, the highest on record, according to Redfin.
People who bought their starter home a few years ago are finding themselves frozen in place by what is known as the “rate-lock effect” — they bought when interest rates were historically low, and trading up would mean a doubling or tripling of their monthly interest payments.
They are locked in, and as a result, families hoping to buy their first homes are locked out.
The article did mention that it’s affecting those that are renting because those with the house that is now “too small” can’t sell it as the interest rates are too good to give up and the new larger house they’d want is now like 2x as expensive as it was in the past. That means that the house they have now won’t become available for someone like me who’s looking to buy a “starter home” so I, and people like me, are stuck renting forever.
I’m in the same boat as you. IMO the solution is to make it so expensive to own rental houses that the people holding on to them are forced to sell. That would free up a ton of real estate.