April 26th, 2024 11:05 AM by Sam Kader MLO130505
Something deeply unusual has happened in the American housing market in between 2021 to 2023 as mortgage rates have risen to current level of around 7%. Early in the pandemic in 2020, mortgage rates bottomed up at historic lows giving many households bargains below 3%. By the end of 2023, about 70% of all mortgage holders had rates more than 3% points below what the market would offer them on a new loan. High mortgage rates are not themselves remarkable. The trouble is the average American household with a mortgage is now sitting on a fixed rate that's well below 3% lower than market. Since then, mortgage rates rose from their pandemic low so high, so fast and seemingly overnight that most homeowners found themselves in a situation where it might now feel financially foolish to sell their home. On average, these locked-in effects are worth about $50,000 to the average mortgage holder. Some of these effects may sound similar to the years after the 2008 housing crisis when underwater mortgages trapped many people in homes they wanted to leave. Today's challenge; however, may be more lasting since 30-year mortgage rates get locked for 30 years and since rates below 3% are unlikely to be seen again anytime soon.
For homeowners who are not planning to move anytime soon, the low rates they secured during the pandemic will benefit them for years to come. These locked-in households haven't been able or unwilling to relocate for better jobs or higher pay and haven't been able to downsize of acquire more space resulting in higher home prices and gummed up the market with low inventory.
Perhaps you can convert your current homes to a rental unit and you may be eligible for an upgrade to a new primary or buy a second home as an investment property - check our current rates here for either a new primary or an investment property.