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Seriously, Why Aren’t People Selling Their Homes?

There’s no denying that housing inventory is incredibly tight, and that home prices are steadily rising in almost every major metro in the country. But there’s also no denying that these two factors should entice more people to sell their homes. So, why are so few people putting their homes on the market?

According to Mark Fleming, Chief Economist at First American, the answer is 30 years in the making. If you look back at mortgage rates from their high of 18 percent in 1981—that is, for a 30-year fixed-rate mortgage—to their low of 3 percent in 2012, you will find mortgage rates have been on a long run decline, which, he says, “encouraged existing homeowners to both move more often and to refinance more often.” Refinances, he continues, could have happened multiple times each move.

Further, because mortgage rates are so low, there’s really only one way they can go if they move at all: up. If rates go up, incentive to move goes down, as Fleming says—“Why move when it will cost more each month to borrow the same amount from the bank? A homeowner can re-extend the mortgage term another 30 years to increase the amount one can borrow at the higher rate, but the mortgage has to be paid off at some point.”

As a result, he says, “existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate.”

However, being a prisoner of one’s own home isn’t the worst thing in the world, even if it is causing inventory shortages. Rising home prices, coupled with higher interest rates leaves open the possibility that someone moves but is stuck paying an escalated price. Even if there’s no reward, there’s no risk in loss for staying put.

About Author: Joey Pizzolato

Joey Pizzolato is the Online Editor of DS News and MReport. He is a graduate of Spalding University, where he holds a holds an MFA in Writing as well as DePaul University, where he received a B.A. in English. His fiction and nonfiction have been published in a variety of print and online journals and magazines. To contact Pizzolato, email [email protected].
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