The housing market remains in a gridlock as homeowners, faced with high mortgage rates and soaring home prices, find themselves unable to move. The situation has affected various groups—renters struggling to buy, homeowners looking to upgrade, and retirees hoping to downsize—all of which are feeling the bottleneck in the real estate sector. As of June 2024, existing-home sales dropped by 5.4% from the previous year, with the median sale price reaching $426,900, the highest ever recorded.
Recent research from Point highlights how this deadlock has worsened. While 35% of homeowners expressed interest in moving last year, that number has jumped to 72% today. Nearly three-fourths of homeowners are hoping to move, but due to the current market conditions, many are putting their plans on hold, creating a backlog of buyers. This phenomenon is known as the “lock-in effect,” where rising interest rates and escalating housing costs are preventing homeowners from making the move they want.
Point’s findings show that 55% of homeowners who intended to move in the last year were unable to do so. High home prices remain the biggest barrier, with 51% of respondents saying it has delayed their plans. Another 48% indicated that moving would saddle them with a higher mortgage rate, making the prospect even more daunting. The lack of housing inventory is also a major issue, as 27% of homeowners cancelled or delayed their move because they couldn’t find a suitable new home.
Homeowners Dreaming but Not Moving
Despite many wanting to move, the majority aren’t packing boxes just yet. The number of homeowners wishing they could relocate has surged by almost 40 percentage points since last year, with 72% expressing the desire to move, up from 35%. This summer, nearly 47% hoped to move within the next 12 months, but only 21% believe they will actually do so.
Mortgage rates are a major factor holding homeowners back. 90% of those hoping to move say they need rates to fall below 6% to consider purchasing a new home within the next 6-12 months. While rates below 6% were common between 2008 and 2022, experts predict that such low rates may not return until late 2024 or beyond.
Why Homeowners Want to Move
Even with market hurdles, many homeowners are eager to move due to concerns over their home’s size and location. Around 40% of homeowners cited their home’s size as the primary reason for wanting to relocate, whether they need a bigger space (25%) or are looking to downsize (16%). Another 36% pointed to location-related reasons. Only 11% of homeowners are looking to access home equity, and 8% feel their current home is too expensive.
Renovations could offer a solution to homeowners stuck in place due to size concerns. 66% of homeowners plan to undertake home improvements in the next 12-18 months, with 39% planning to use cash for their projects. However, high interest rates are preventing some from pursuing home equity lines of credit (HELOCs) or refinancing, as 35% said the current rates are too steep.
Market Stuck in a Holding Pattern
The housing market gridlock is unlikely to break soon. For homeowners hoping to move, renovations or staying put are the most viable options for now. While many are waiting for a shift in mortgage rates or housing prices to make their move possible, it remains to be seen how long this deadlock will last.
Click here for more on Point’s study on housing gridlock.
