Considering moving? Learn why now is a bad time to move and what a better option might be.
In 2023’s real estate landscape, your dream of finding the perfect home might feel more and more out of reach. According to Truehold’s new report on American sentiment around homeownership, 72% of current homeowners would advise against making a home purchase in today’s market. Economic conditions have created a landscape that is fiercely competitive, and the prospect of moving can feel daunting.
But why exactly has moving become so difficult? Below, we'll explore the top challenges facing homeowners looking to move, and then offer an innovative option that can offer the best of both worlds.
Unfortunately for buyers, mortgage rates have climbed steadily as the Fed continues to try to tamp down inflation. The average mortgage rate for a 30-year fixed mortgage currently hovers around 7.03%, and the 15-year fixed mortgage rate is around 6.45%1. These escalated rates hurt both buyers and sellers. Buyers struggle to afford their ideal homes, while sellers hesitate to exchange their current low interest rates for rates exceeding 7%. This reluctance has led to a notable reduction in available homes on the market, a stark contrast to what would be the case if rates were at more palatable levels.
In addition, obtaining a mortgage has become more complex due to stringent lending standards and increased competition among borrowers2. These challenges can prolong the process of purchasing a new home, causing additional stress and uncertainty for those looking to move.
Homeowners who want to move are facing a big problem: a lack of housing inventory. Many homeowners who secured historically low interest rates in 2020 and 2021 are unwilling to swap their current rate for a significantly higher one. Because these people are now staying put in their homes, there are fewer homes on the market than would have otherwise been the case. This has led other homeowners, who might’ve sold despite high interest rates, to not to sell, since the likelihood of them finding a home they love is slim given the limited options. This cycle is likely to continue until rates stabilize.
In addition, inventory is also tight because of a decline in new construction, as builders have faced high material costs due to inflation, supply chain issues, and COVID induced labor shortages3. Further, investors have taken advantage of low interest rates to acquire significant amounts of inventory. The lack of inventory has led to fierce competition amongst buyers and made it extremely difficult to move.
Home prices have increased significantly since the start of the pandemic, creating substantial hurdles for those planning to move or buy a home4. Several trends including inflation, remote work, and limited supply and high demand, have fueled the increase in home values.
These amplified prices are a stark reality for prospective buyers and movers, outpacing salary growth and rendering homeownership a distant dream for many. Even for those who wish to downsize or relocate, the high selling price of their existing homes does not necessarily provide the financial ability to afford escalating prices in their target locations.
Many homeowners have been hesitant to list their properties due to the fear of not finding a suitable replacement. Since, as mentioned, many current homeowners bought their homes when mortgage rates were low, selling would mean trading in their low-rate mortgage for a higher one. For many, this would mean that they can’t afford the type of home they might’ve been able to if rates were still low.
Homeowners are also reluctant to sell given the high home prices and limited supply that currently characterize the market. Their hesitance to sell further exacerbates the inventory shortage and restricts the options available for buyers, creating an unfortunate cycle.
Factors such as fears of ongoing inflation, bank sector volatility, debt ceiling drama, and a possible impending recession are also adding to the uncertainty in the housing market, which may discourage both buying and selling. In uncertain economic times, people worry about job loss and reduced income, which can make them hesitant to take on the large financial commitment of a mortgage.
In addition, sellers may also hesitate to sell during a recession or period of economic uncertainty, especially if they risk making a loss on their investment. This can reduce the supply of homes on the market, which can drive up prices and make it more difficult for buyers.
It’s hard for interested buyers to not feel disheartened in this market. While the disappointment is justified, there are luckily other innovative options. One of these is a sale-leaseback. A sale-leaseback allows homeowners to sell their property, cash out their home equity, and keep living in the home they love, all while avoiding the complexities of moving in the current housing market.
A sale-leaseback offers greater flexibility and stability, less stress, and doesn’t require the homeowner to immediately find a new place to live. This arrangement also provides financial benefits, such as tax advantages and reduced maintenance responsibilities.
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