In this housing market, it makes less and less sense to move. American homeowners with the lowest mortgage rates in modern history will find it much more expensive to buy their next home. Tenants facing high inflation might be better off renewing a lease than looking for a new one. And for almost everyone, finding the right home next door has become more difficult when there are so few vacancies available.
The easiest and most affordable decision for many Americans will be to stay put, even if their home becomes too small, too big, too cluttered, too far from work, too isolated from family, or too difficult to maintain.
The pace at which Americans move, both across town and across the country, has steadily declined since the 1980s. Now, all housing market conditions are aligned to reduce that rate of travel even further. mobility. It’s a problem both for the wider economy – workers may need to relocate to find new jobs – and for millions of households who will struggle to change homes to adapt to the evolution of their life.
“All of this suggests that America could be stuck,” said Lawrence Yun, chief economist for the National Association of Realtors.
A likely consequence: “Unanimously,” Mr. Yun said, “I think people would say that there is less happiness in the country because people live in a poorly housed unit.
Kyren Bogolub’s poorly housed unit is a two-bed, one-bath duplex in Boulder, Colorado, which she shares with her partner and a third roommate. They moved in in 2020, lured by what seemed like a temporary, cheap, dog-friendly home — a good place to finish college on meager stipends.
But a year after graduating, they still live like this: Ms. Bogolub and her partner, Colin Sturrock, in a bedroom that contains their twin bed and the two desks where they work remotely. They set up the room so that one of them can change clothes even if the other is on Zoom. They’ve taped off the flashing computer lights that can make it hard to sleep at night.
“The plan was to get a degree, get a job, move,” said Ms Bogolub, who is 33. “We did two of those three things.”
The third turned out to be much more difficult. Their alternatives are a study in the absurdity of the US housing market today. Boulder rents rose more than 15% last year. Boulder County also lost more than a thousand homes to wildfires in December, making competition for housing even tougher. Ms. Bogolub also considered buying. Then a tiny two-bed, one-bath house a few blocks away sold this month: 864 square feet in need of renovation for $1.25 million.
By comparison, the bedroom with the two desks doesn’t seem so bad, even for two adults in their thirties with decent jobs.
“That’s what’s kind of mind-boggling,” said Ms. Bogolub, who now works for the Colorado Geological Survey. “If we can’t really get things done, I don’t know who can.”
The state of employment in the United States
The US economy has recovered more than 90% of the 22 million jobs lost at the height of the pandemic in the spring of 2020.
In the mid-1980s, about one in five people in America moved every year, most within the same county. By 2021, that number had fallen to one in 12. And all the signs this spring point to even more people stuck like Ms. Bogolub has been: new mortgage applications and home sales have fall. Money spent on home renovations has skyrocketed. And tenants are renewing their leases at record highs.
The housing market has changed the math of moving for almost everyone. With rents rising at a record pace, tenants typically face lower price increases by staying with their current landlord than by signing a new lease. This is because landlords want to avoid the costs of finding new tenants and handing over a property.
“You get a discount for staying put,” said Jay Parsons, chief economist at RealPage, a platform used by property managers to process and track rents. The problem isn’t just that it’s more expensive to move, he said. The most vacant buildings today are also the most expensive.
In homeowners’ reckoning, mortgage rates fell to a modern low at the start of the pandemic. With widespread refinancing, four out of five mortgage holders now have an interest rate below 5% (half have a rate of 4% or less). Now, these bargain rates will lock in many homeowners if interest rates remain high after a recent hike.
These dynamics are also interrelated. When people buy a house or find a new rental, they create a chain of vacant homes that open up behind them.
“Most people live off other people’s decisions to leave a unit,” said Dowell Myers, professor of politics, planning and demography at the University of Southern California.
Each newly built house has a similar effect, allowing for a series of vacations, including among rentals. Conversely, anyone who doesn’t moving contributes to obstructing the local market for others.
Economists have primarily worried about the long-term decline in long-distance travel, given that migration from one part of the country to another has tended to be a source of upward mobility.
But today, the most prosperous regions of the country also have the most expensive housing. This deters people from moving to where they could find better jobs, ultimately limiting US economic growth, economists say.
However, since the housing crisis of the mid-2000s, almost all of the decline in mobility nationwide has been due to a decline in local moves, and local moves by tenantsMr. Myers and his colleagues find.
During this period, the supply of new homes built in America increasingly fell short of demand. Millennials, now the largest generation of living adults, came of age during the same period trying to form their own households and later buy their own homes. The combination of this demographic pressure and the growing housing shortage has helped create today’s affordability crisis.
In 2019, on the eve of the pandemic, there were 19.4 million more renters in America than in 2006. And so we expect there will be many more renters by then as well. . But in 2019, there were actually 3.6 million less of tenants who moved the previous year than in 2006.
“It’s a precipitous decline,” said Riordan Frost, who studies mobility at the Harvard Joint Center for Housing Studies. “It’s really going to go down because people can’t afford the asking rent” on a new unit.
All of this matters, he said, not just because people have to move to better jobs or better-suited homes. America remains deeply segregated by race and income, and research shows that the neighborhoods where children grow up influence their fortunes in life. If people don’t move as often, Frost said, families living in isolated or less prosperous places are less likely to break out of these patterns.
“If people fail to move to accommodate changing family circumstances, it has huge social costs,” said Michael Andersen, a researcher at the Sightline Institute who advocates for more housing construction. That means young families who can’t travel close to relatives for help, or aging Americans isolated from social networks.
In the years to come, many households may simply not emerge from a sort of paralysis of indecision.
Joe Swiderski and his wife have lived in the same townhouse in Washington since 2013. They would like more space for their two daughters, now 7 and 2. But they refinanced during the pandemic into a 20-year loan that reduced their mortgage by three years and lowered their interest rate to 2.5%. It made what should be a fairly simple decision – a growing family needs a bigger house – a whole lot more complicated, Mr Swiderski said.
“What more are you going to weigh? ” he said. Bigger land or a higher interest rate? Lack of storage, or soaring house prices? “What will ultimately be the tipping point? ” he said. “We don’t necessarily know.”
Ms Bogolub, in Boulder, will most likely stay put for the time being as well, if her landlord again offers to renew her lease without raising the rent. However, since she and Mr. Sturrock have been living in this house, their lives have changed in at least one way that could make it easier for them to find housing: a few months ago their dog died.
“When that happened,” Ms. Bogolub said, “I was kind of like, ‘Well, I guess on the one hand, it probably improves our options for rental housing.'”