In this housing market, moving makes less and less sense. American homeowners, sitting on the lowest mortgage rates in modern history, will find it much more expensive to buy their next home. Renters facing severe inflation may be better off renewing a lease than looking for a new one. And for most, finding the right annexe has become more difficult when so few vacant houses are available.
The easiest and most affordable decision for many Americans will be to stay—even if their homes are too small, too big, too crowded, too far from work, too isolated from family, or too much maintenance.
Since the 1980s, the speed at which Americans move, both urban and across the country, has steadily decreased. Now all conditions in the housing market are designed to reduce this mobility rate even further. That’s a problem both for the broader economy – workers may have to relocate to find new jobs – and for millions of households who will struggle to adapt their homes to their changing lives.
“All of this suggests that America could be stuck in place,” said Lawrence Yun, chief economist for the National Association of Realtors.
A likely consequence: “Unanimously,” Mr. Yun said, “people would say that there is less happiness in the country because people live in a misguided entity.”
Kyren Bogolub’s misplaced unit is a two bedroom, one bath duplex in Boulder, Colorado that she shares with her partner and a third roommate. They moved in in 2020, attracted by what appeared to be a temporary, cheap, and dog-friendly home — a good place to graduate from grad school on meager scholarships.
But a year after graduating, this is still how they live: Ms. Bogolub and her partner Colin Sturrock in a room containing their bed and the two desks where they work remotely. They set up the room so that one of them can change even when the other is on zoom. They pasted over the blinking computer lights that can make it difficult to sleep at night.
“The plan was: do high school, get jobs, move,” said Ms. Bogolub, who is 33 years old. “We did two of those three things.”
The third proved far more difficult. Your Alternatives is a study of the absurdity of today’s American housing market. Boulder rentals have increased by more than 15 percent in the last year. Boulder County also lost more than a thousand homes to wildfires in December, making housing competition even fiercer. Ms. Bogolub also dealt with the purchase. Then this month, a tiny two-bedroom, one-bath home sold a few blocks away: 864 square feet in need of a $1.25 million renovation.
In comparison, the bedroom with the two desks doesn’t look too bad – even for two adults in their thirties with decent jobs.
“It’s kind of amazing,” said Ms. Bogolub, who now works for the Colorado Geological Survey. “If we can’t really make this work, I don’t know who can.”
Understand inflation and how it affects you
In the mid-1980s, about one in five people in America were moving each year, most of them within the same borough. By 2021, that number had dropped to one in twelve. And all indications are that even more people are stuck than Ms. Bogolub was: New mortgage applications and home sales have fallen. Money spent on home remodeling has skyrocketed. And tenants are renewing their leases at record rates.
The housing market has changed the math of moving for almost everyone. With rents increasing at a record pace, renters typically face smaller price increases if they stay with their current landlord than signing a new lease. That’s because landlords want to avoid the expense of finding new tenants and handing over a property.
“You get a discount to stay,” said Jay Parsons, chief economist at RealPage, a platform used by property managers to process and track rents. The problem isn’t just that moving is more expensive, he said. The buildings with the most vacancies are also the most expensive today.
In calculus for homeowners, mortgage rates fell to modern lows at the start of the pandemic. With a widespread refinance today, four out of five mortgage holders have an interest rate of less than 5 percent (half have an interest rate of 4 percent or less). Now, these bargain rates will keep many homeowners in place if interest rates remain high after a recent spike.
These dynamics are further interconnected. When people buy a house or find a new place to rent, they create a chain of vacancies that open up behind them.
“Most people live off the decisions of others to vacate a unit,” said Dowell Myers, a professor of politics, planning and demography at the University of Southern California.
Each new building has a similar effect and allows for a number of vacancies, even for rental apartments. Conversely, any person who Not move helps to clog the local market for others.
Economists are particularly worried about the long-term decline in long-distance moves, as migration from one part of the country to another is more of a source of upward mobility.
Since the housing crisis of the mid-2000s, however, nearly all of the nationwide decline in mobility has been due to a decline in local moves and local relocations renterfind Mr. Myers and colleagues.
During this time, the supply of newly built homes in America has increasingly lagged behind demand. Millennials, now the largest generation of living adults, came of age during the same period and attempted to start their own households and later to buy their own homes. The combination of these demographic pressures and increasing housing shortages helped create today’s affordability crisis.
Frequently asked questions about inflation
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar won’t go as far tomorrow as it did today. It is usually expressed as the annual change in the price of essential goods and services such as food, furniture, clothing, transportation and toys.
In 2019, on the eve of the pandemic, there were 19.4 million more renters in America than in 2006, so we expect there will be many more renter moves by then as well. But in 2019 it was actually 3.6 million fewer Tenants who had moved in the previous year than 2006.
“That’s a steep decline,” said Riordan Frost, who studies mobility at the Harvard Joint Center for Housing Studies. “It’s really only going to get lower as people can’t afford the rent it’s asking” for a new unit.
All of this is important, he said, not just because people need to move for better jobs or better-fitting homes. America remains highly segregated by race and income, and research shows that the neighborhoods children grow up in affect their destiny in life. When people don’t move as often, Mr Frost says, families in separate or less affluent locations have less chance of breaking out of these patterns.
“Failing to move to accommodate changing family circumstances has a huge social cost to people,” says Michael Andersen, a researcher at the Sightline Institute, which advocates for housing. That means young families who can’t get close to relatives for help, or aging Americans who are isolated from social networks.
In the years to come, many households may simply be stuck in a kind of paralysis of indecisiveness.
Joe Swiderski and his wife have lived in the same Washington row house since 2013. They would like more space for their two daughters who are now 7 and 2 years old. But they refinanced into a 20-year loan during the pandemic that shortened their mortgage by three years and lowered their interest rate to 2.5 percent. That has made what was a fairly simple decision – a growing family needs a bigger house – much more complicated, Mr Swiderski said.
“What will you weigh more?” he said. A bigger yard or a higher interest rate? The lack of storage space or the rising housing prices? “What will eventually be the turning point?” he said. “We don’t necessarily know.”
Ms. Bogolub in Boulder will also most likely stay for the time being if her landlord again offers to extend the lease without increasing 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 apartment search easier: A few months ago, their dog died.
“When that happened,” Ms. Bogolub said, “I was like, ‘Well, I think, on the one hand, I think this probably improves our rental unit options.'”