The real estate market has altered the mathematics of moving

In this real estate market, it makes less and less sense to move. American homeowners who have the lowest mortgage rates in modern history will find it much more expensive to buy their next home. Renters facing strong inflation may be better off renewing a lease than looking for a new one. And for most people, it has become more difficult to find the right house next door when there are so few vacancies available.

The easiest and most affordable decision for many Americans will be to stay where they are, even if their homes become too small, too large, too crowded, too far from work, too isolated from family, or too difficult to maintain.

The rate at which Americans move, both across the city and across the country, has been steadily declining since the 1980s. Now all conditions in the housing market are aligned to further reduce that rate of mobility. That’s a problem both for the economy at large (workers may have to move to find new jobs) and for millions of households who will find it difficult to change their homes to fit their changing lives.

“All of this suggests that the United States may be in the doldrums,” said Lawrence Yun, chief economist at the National Association of Realtors.

One 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-bedroom, one-bathroom duplex in Boulder, Colorado, that she shares with her partner and a third housemate. They moved in 2020, lured by what seemed like a cheap, dog-friendly temporary home, a good place to finish grad school on meager stipends.

But a year after graduating, they still live like this: Ms. Bogolub and her partner, Colin Sturrock, in a room that has their double bed and the two desks where they work remotely. They have set up the room so that one of them can change their clothes even if the other is on Zoom. They have taped up the flickering computer lights that can make it hard to sleep at night.

“The plan was to graduate, get a job, move,” said Bogolub, 33. “We’ve done two of those three things.”

The third has been much more difficult. His alternatives are a study in the absurdity of the American real estate market today. Boulder rents have increased more than 15 percent in the last year. Boulder County also lost more than a thousand homes to the wildfires in December, making the competition for housing even tougher. Ms. Bogolub has also considered buying. Then a tiny two-bedroom, one-bathroom house a couple of blocks away sold this month: 864 square feet in need of a $1.25 million makeover.

By comparison, the bedroom with the two desks doesn’t seem too bad, even for two 30-year-olds with decent jobs.

“That’s kind of mind-boggling,” said Ms. Bogolub, who now works for the Colorado Geological Survey. “If we really can’t make this work, I don’t know who can.”

In the mid-1980s, about one in five people in the United States moved annually, most within the same county. By 2021, that number had dropped to one in 12. And all signs this spring point to even more people being stuck like Bogolub has been: New mortgage applications and home sales are down. Money spent on home remodeling has skyrocketed. And tenants are renewing their leases at record levels.

The housing market has altered the math of moving for just about everyone. With rents rising at a record pace, renters typically face smaller price increases when staying with their current landlord than when signing a new lease. That’s because landlords want to avoid the costs of finding new tenants and giving up a property.

“You get a discount for staying,” said Jay Parsons, chief economist at RealPage, a platform used by property managers to process and track rentals. The problem isn’t just that it’s more expensive to move, he said. The buildings with the most vacancies today are also the most expensive.

In the calculation of homeowners, mortgage rates fell to a modern low early in the pandemic. With refinancing widespread, four out of five mortgage holders today have an interest rate of less than 5 percent (half have a rate of 4 percent or less). Now, those bargain rates will have the effect of locking out many homeowners if interest rates stay high after a recent hike.

These dynamics are more connected to each other. When people buy a house or find a new rental, they create a chain of vacancies that open up behind them.

“Most people live off other people’s decisions to vacate a unit,” said Dowell Myers, a professor of politics, planning and demography at the University of Southern California.

Each newly built home has a similar effect, opening up a series of vacancies, even between rentals. On the contrary, anyone who No moving helps obstructs the local market for others.

Economists have been primarily concerned with the long-term decline in long-distance movements, since migration from one part of the country to another has tended to be a source of upward mobility.

But today the most prosperous parts of the country also have the most expensive homes. That deters people from moving to where they might find better jobs, ultimately limiting America’s economic growth, economists say.

However, since the housing boom of the mid-2000s, almost all of the decline in mobility nationwide has been due to a drop in local moves, and local moves by tenantsfind Mr. Myers and his colleagues.

During this time, the supply of new homes built in the United States has increasingly lagged behind demand. Millennials, now the largest living adult generation, came of age during the same period trying to build their own homes and then buying their own homes. The combination of that demographic pressure and the growing housing shortage helped set up the current affordability crisis.

In 2019, on the eve of the pandemic, there were 19.4 million more renters in the United States than there were in 2006. So we expect there will be many more renters by then as well. But by 2019, there were actually 3.6 million less tenants who moved in the year before than in 2006.

“That’s a precipitous decline,” said Riordan Frost, who studies mobility at the Harvard Joint Center for Housing Studies. “It’s really only going to go down as people can’t pay their requested rent” in a new unit.

All of this is important, he said, not just because people need to move for better jobs or more suitable housing. 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 in segregated or less affluent places are less likely to break out of those patterns.

“If people don’t move to accommodate changing family circumstances, that has colossal social costs,” said Michael Andersen, a researcher at the Sightline Institute, which advocates for more housing construction. That means young families unable to move near relatives for help, or older Americans cut off from social media.

In the years to come, many households may simply not snap out of a kind of paralysis of indecision.

Joe Swiderski and his wife have lived in the same Washington row house since 2013. They would like more space for their two daughters, now ages 7 and 2. But they refinanced a 20-year loan during the pandemic that shaved three years off their mortgage. and lower your interest rate to 2.5 percent. That has made what should be a fairly simple decision — a growing family needs a bigger house — much more complicated, Swiderski said.

“What are you going to weigh more?” he said. A bigger yard or a higher interest rate? The lack of storage or the exorbitant price of housing? “What is finally going to be the turning point?” he said. “We don’t necessarily know.”

Chances are, Ms. Bogolub, in Boulder, will also stay in her place for now, if the landlord again offers to renew her lease without raising the rent. However, in the time that she and Mr. Sturrock have lived in this house, their lives have changed in at least one way that could make their housing search easier: A couple of months ago, their dog died.

“When that happened,” Ms. Bogolub said, “I was like, ‘Well, I guess on the one hand this probably improves our options for rental units.'”

Leave a Comment

Your email address will not be published.