Americans locked into lower mortgage rates have been increasingly unwilling to sell their homes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm never moving out of my starter house at a 2.2% mortgage. We just get used to making do with less space.

I feel this way too. I'd LIKE to move, but going from 1500 sq ft to 2000-2500 with a yard would triple my mortgage. I'm more interested in retiring someday.

I’m glad everyone is posting these so people can understand the buffoonery that is the “never pay off your mortgage” argument.

Money is supposed to serve your life; your life is not supposed to be lived in service of money. But for these posters, a 2.5% mortgage is worth living your entire life in a house that you’re not happy with. Makes total sense.

And it gets to the broader point that while paying off your mortgage early will result in a lower retirement account balance at age 65 in nine instances out of 10, it provides so much flexibility and peace of mind that it’s almost unquestionably the right thing to do in most cases. There’s a reason that many, many rich people buy houses in cash.

Your whole post is BS. But very few rich people pay cash for real estate. They just don’t use traditional mortgages.

Their argument comes from the 'be rich' school of investment advice

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm never moving out of my starter house at a 2.2% mortgage. We just get used to making do with less space.

I feel this way too. I'd LIKE to move, but going from 1500 sq ft to 2000-2500 with a yard would triple my mortgage. I'm more interested in retiring someday.

I’m glad everyone is posting these so people can understand the buffoonery that is the “never pay off your mortgage” argument.

Money is supposed to serve your life; your life is not supposed to be lived in service of money. But for these posters, a 2.5% mortgage is worth living your entire life in a house that you’re not happy with. Makes total sense.

And it gets to the broader point that while paying off your mortgage early will result in a lower retirement account balance at age 65 in nine instances out of 10, it provides so much flexibility and peace of mind that it’s almost unquestionably the right thing to do in most cases. There’s a reason that many, many rich people buy houses in cash.

Your whole post is BS. But very few rich people pay cash for real estate. They just don’t use traditional mortgages.

Their argument comes from the 'be rich' school of investment advice

I think it’s the argument that to be rich, you have to do what the rich do now that they’re rich, rather than how they became rich.

And there’s not a multi millionaire in America that didn’t use leverage to build wealth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yep we are the older people everyone likes to blame at the moment. 3000 sq ft house in a good school district, almost paid off. more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment. we don't want to stay put, but it doesn't make any sense to move.

The only thing I can think of, what happens to good school districts with old people not budging to downsize down the road? Not enough kids going to those school districts.

I can answer this. I live on the west coast and we have been thinking about leaving our $1.5M house in the city school district to buy into a very good school district in a self-contained smaller city with its own police/schools/utilities/parks. To afford a house there we’ll need to leave our 3% mortgage and pay at least $2.5M.

While doing research, we found a ton of consulting and demographic reports from school board meetings and realized that the very good school district is rapidly shrinking- graduating HS classes are going from 400 this year to a projected 300 when my DD will be in HS. They plan to close at least one elementary soon but need to update several buildings in the meantime. The problem? When they’ll need to put a levy up for vote the majority of voters will be >55 and in 10 years the majority will be >65. The area has strong zoning and discourages condos, apartments and assisted living, so most residents plan to age in place.

I think the schools will bounce back, but high housing costs in our area and younger families locked out of houses in “good” districts mean it will take the older generation dying for a reset. And then schools will be stretched for a while to accommodate the rush of new families- that’s what happened in my childhood suburb.

You're smart to research this before buying. Is this by any chance CA? CA has different issues with families fleeing due to rising crime and insane progressive politics.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yep we are the older people everyone likes to blame at the moment. 3000 sq ft house in a good school district, almost paid off. more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment. we don't want to stay put, but it doesn't make any sense to move.

The only thing I can think of, what happens to good school districts with old people not budging to downsize down the road? Not enough kids going to those school districts.

I can answer this. I live on the west coast and we have been thinking about leaving our $1.5M house in the city school district to buy into a very good school district in a self-contained smaller city with its own police/schools/utilities/parks. To afford a house there we’ll need to leave our 3% mortgage and pay at least $2.5M.

While doing research, we found a ton of consulting and demographic reports from school board meetings and realized that the very good school district is rapidly shrinking- graduating HS classes are going from 400 this year to a projected 300 when my DD will be in HS. They plan to close at least one elementary soon but need to update several buildings in the meantime. The problem? When they’ll need to put a levy up for vote the majority of voters will be >55 and in 10 years the majority will be >65. The area has strong zoning and discourages condos, apartments and assisted living, so most residents plan to age in place.

I think the schools will bounce back, but high housing costs in our area and younger families locked out of houses in “good” districts mean it will take the older generation dying for a reset. And then schools will be stretched for a while to accommodate the rush of new families- that’s what happened in my childhood suburb.

You're smart to research this before buying. Is this by any chance CA? CA has different issues with families fleeing due to rising crime and insane progressive politics.

If it is California, it probably has more to do with Prop 13 than families "fleeing" due to rising crime.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yep we are the older people everyone likes to blame at the moment. 3000 sq ft house in a good school district, almost paid off. more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment. we don't want to stay put, but it doesn't make any sense to move.

The only thing I can think of, what happens to good school districts with old people not budging to downsize down the road? Not enough kids going to those school districts.

I can answer this. I live on the west coast and we have been thinking about leaving our $1.5M house in the city school district to buy into a very good school district in a self-contained smaller city with its own police/schools/utilities/parks. To afford a house there we’ll need to leave our 3% mortgage and pay at least $2.5M.

While doing research, we found a ton of consulting and demographic reports from school board meetings and realized that the very good school district is rapidly shrinking- graduating HS classes are going from 400 this year to a projected 300 when my DD will be in HS. They plan to close at least one elementary soon but need to update several buildings in the meantime. The problem? When they’ll need to put a levy up for vote the majority of voters will be >55 and in 10 years the majority will be >65. The area has strong zoning and discourages condos, apartments and assisted living, so most residents plan to age in place.

I think the schools will bounce back, but high housing costs in our area and younger families locked out of houses in “good” districts mean it will take the older generation dying for a reset. And then schools will be stretched for a while to accommodate the rush of new families- that’s what happened in my childhood suburb.

You're smart to research this before buying. Is this by any chance CA? CA has different issues with families fleeing due to rising crime and insane progressive politics.

If it is California, it probably has more to do with Prop 13 than families "fleeing" due to rising crime.

That falls under "insane progressive policies."

[Anonymous]

40 percent of home owners have no mortgage.

Of the remaining 60 percent not all have 30 year fixed originated 30 year mortgage from Spring 2020 to Spring 2022.

I work at a bank and even in Spring 2020 to Spring 2022 the refinanced loans were often 10-15 years.

Some loans even with low rates customers took out even lower 5 year adjustable (adjusts ever 5 years) or out 7/3 product. Fixed for 7 then adjusts every 3 years.

In addition people with older “seasoned” mortgages often backed out of refinancing. For instance. For instance mortgage rates in 2012, 2015 and 2016 were only like 3.5 if you paid points. A lot of those people did not feel like paying money to refinance and restart clock on 30 year.

Yes a good chunk of people locked in low 30 year rates. But it is maybe 20-40 percent of homes.

I highly doubt a 2012 mortgage at 3.5 was in rush to refinance in 2021 9 years in and considering homes were cheap in 2022 and underwriting string after financial crisis.

For example my investment condo in 2012 we has foreclosures. We were not Fannie Freddie eligible and banks wanted 25 percent down.

A 275k unit max loan was $206,250. Nine years in not worth refinancing

Flash forward to 2021 units were 500k and banks would take 10 percent down. That is a 450k mortgage!! People forget in 2009-2014 homes so much cheaper

[Anonymous]

I totally get it and if someone is living in the house, I don't resent it. I wouldn't move either!

I think where it becomes a problem is when people snapped up a few homes at the low rates (or refinanced down to a low rate) and have no desire to sell because the mortgage is so manageable and with real estate prices continuing to go up, why not hold on until you can get as much as possible? While I understand this approach from an individual financial standpoint, from a public policy standpoint this is problematic because to reduces inventory of available homes (making it harder for people to move for jobs, upgrade to a family home, or begin to build family wealth). It concentrates a lot of the real estate wealth in fewer hands, and runs counter to some of our other policy goals (neighborhoods of renters tend to be less stable, have more crime, etc.). A lot of people also AirBnB these homes, which can be bad for both the neighborhood and for the local economy depending on how that's taxed. There's not a ton of social benefit in enabling people to own a lot of SFHs as investment properties -- it would be better for society if they focused investments on commercial properties or multi-family housing.

So I think we should be taxing investment properties more, especially when they are single family homes. And limiting AirBnB's more, or taxing them at a much higher rate (more like hotels). We should incentivize people to sell more of these properties that they aren't living in as it would get more families into their own residential home and also help with problems like crime that have become more of an issue in recent years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yep we are the older people everyone likes to blame at the moment. 3000 sq ft house in a good school district, almost paid off. more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment. we don't want to stay put, but it doesn't make any sense to move.

The only thing I can think of, what happens to good school districts with old people not budging to downsize down the road? Not enough kids going to those school districts.

I can answer this. I live on the west coast and we have been thinking about leaving our $1.5M house in the city school district to buy into a very good school district in a self-contained smaller city with its own police/schools/utilities/parks. To afford a house there we’ll need to leave our 3% mortgage and pay at least $2.5M.

While doing research, we found a ton of consulting and demographic reports from school board meetings and realized that the very good school district is rapidly shrinking- graduating HS classes are going from 400 this year to a projected 300 when my DD will be in HS. They plan to close at least one elementary soon but need to update several buildings in the meantime. The problem? When they’ll need to put a levy up for vote the majority of voters will be >55 and in 10 years the majority will be >65. The area has strong zoning and discourages condos, apartments and assisted living, so most residents plan to age in place.

I think the schools will bounce back, but high housing costs in our area and younger families locked out of houses in “good” districts mean it will take the older generation dying for a reset. And then schools will be stretched for a while to accommodate the rush of new families- that’s what happened in my childhood suburb.

You're smart to research this before buying. Is this by any chance CA? CA has different issues with families fleeing due to rising crime and insane progressive politics.

If it is California, it probably has more to do with Prop 13 than families "fleeing" due to rising crime.

DP: I live in CA, of those fleeing I have never heard anyone say "it's because of prop 13" which never comes up in any conversations I've had with those thinking of leaving. It's overwhelmingly because of 1)politics 2)crime 3)cost of living. Obviously I haven't spoken to everyone who is leaving the state, but you saying it's because of Prop 13 is misguided and false.

[Anonymous]

Anonymous wrote:There are two situations for people with low rate mortgages:

A) Happy (enough) in their homes. They have no interest in moving or moving wouldn't give them a positive cost benefit analysis. These people will stay put.

B) Not happy in their homes/location and can afford to move. These people will sell to go live the lives they want and can afford.

A third option is that people would rent out their homes with low-rate mortgages, either buying a new home or renting something else themselves.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Downsizing makes very little sense. By the time your last one out of college and you and your wife retired people are between 60-70.

My house for instance is worth 1.7 million with 375k on mortgage.

I plan on retiring at 67. By then mortgage is maybe 250k.

To sell I pay
$85,000 commission
$20-25k prepping house for sale and home inspection things.
$10k closing fees. (Transfer tax, recording fees etc.)
$10k moving fees and misc
$20k closing costs new home
$20k misc repairs upgrades to new house.

I am at $175k to “downsize”

Nearly all of that money I never get back.

Let’s say I down size at 70. Even a 1k a month savings is going to take me 175 months to break even, or 14.5 years.

So old people sit in big homes. Remember the old people have landscapers, handiman and mostly mortgage free.

And with homestead exemptions taxes in the new smaller home could be more

The only way this makes sense is if you are primarily (or exclusively) concerned with net worth in retirement.
I am not.

I am not. But I may just keep my big house and buy a smaller condo in a beach town. Do you really think at age 70 I want to sell a 6,1000 sf house? My neighbor has a 7,000 sf house at 80 and his wife 78. He is in great health but made a whole master squire with bath on main level for him and wife. Upstairs he never goes but the five bedrooms and three baths upstairs are when kids and grand kids visit. The two bedrooms one bath in basement will be if they need live in help. He has 8 bedrooms. But he is a rare 48 years same house in MoCo and qualified for the over 65 and 40 years in same house tax break.

Sounds crazy but he paid $150k in a house worth 1,8 million. If he sold cap gains would be crazy

Yes, good point about the capital gains. If he lives in the house until death, heirs would get a new stepped-up basis and could sell with no capital gains tax.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Downsizing makes very little sense. By the time your last one out of college and you and your wife retired people are between 60-70.

My house for instance is worth 1.7 million with 375k on mortgage.

I plan on retiring at 67. By then mortgage is maybe 250k.

To sell I pay
$85,000 commission
$20-25k prepping house for sale and home inspection things.
$10k closing fees. (Transfer tax, recording fees etc.)
$10k moving fees and misc
$20k closing costs new home
$20k misc repairs upgrades to new house.

I am at $175k to “downsize”

Nearly all of that money I never get back.

Let’s say I down size at 70. Even a 1k a month savings is going to take me 175 months to break even, or 14.5 years.

So old people sit in big homes. Remember the old people have landscapers, handiman and mostly mortgage free.

And with homestead exemptions taxes in the new smaller home could be more

The only way this makes sense is if you are primarily (or exclusively) concerned with net worth in retirement.
I am not.

I am not. But I may just keep my big house and buy a smaller condo in a beach town. Do you really think at age 70 I want to sell a 6,1000 sf house? My neighbor has a 7,000 sf house at 80 and his wife 78. He is in great health but made a whole master squire with bath on main level for him and wife. Upstairs he never goes but the five bedrooms and three baths upstairs are when kids and grand kids visit. The two bedrooms one bath in basement will be if they need live in help. He has 8 bedrooms. But he is a rare 48 years same house in MoCo and qualified for the over 65 and 40 years in same house tax break.

Sounds crazy but he paid $150k in a house worth 1,8 million. If he sold cap gains would be crazy

Yes, good point about the capital gains. If he lives in the house until death, heirs would get a new stepped-up basis and could sell with no capital gains tax.

And that describes 50 percent of my block in Potomac. I have multiple neighbors who bought between 1975 and 1999. Big gains and no mortgage.

Plus I bought my large home empty Nestor. It has two zones HVAC for heat/AC. One bottom two floors and one top floor. I was surprised at low utility bill prior owner showed me. But he said they moved TV room upstairs and downstairs heat/ac pretty much shut off 8pm to 8am every day.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

I think you are thinking of that window of time where your kids are "adults", but do not yet have any obligations to a spouse, a spouse's family, or any children. This is when they are most likely to visit for holidays or bring friends with them. Now buy yourself a giant beach house, and you may just in fact have visitors quite often!

I wish my in laws had this. Instead, I am stuck visiting your typical TX rambler in sprawling suburbia where 7 of us (3 adults and 4 kids-my BIL lives there with his 2 teen children) share 1 bathroom because the 2nd one is in the master where grandma sleeps, we all have to share rooms, and the bedroom doors have no locks. Oh, and we are stuck there if the 2 people with cars are working and it isn't walking distance to anything. I am forced to do this for a week every year. By the time we've paid for the ridiculously expensive cost of flying 4 of us, we can't really shell out for a week at a hotel or a rental vehicle. I really dislike the holidays for this reason, but I do it so my husband doesn't divorce me.

My parents come to us. It is so much easier that way.

NP. I’m hoping that my kids (teens) don’t move away so we can get together for family dinners with guests driving a short distance back to their own homes. In my opinion our society has gotten too transient, and living near family should be prioritized more.

Living near family is an ideal situation for many, but my husband’s family isn’t leaving TX and my family is on the east coast. There was a period when we were going to move to Austin and my parents and my aunt were going to relocate, too, but I am thankful now that this did NOT happen for a thousand different reasons.

Once people are spread out, it becomes difficult to undo it. But if your husband had stayed in Texas, and you stayed near family on the East coast and married someone from there, life could have been simpler? As parents age, the distance becomes incredibly more challenging and regrettable.

[Anonymous]

Anonymous wrote:I’m dealing with elderly parents and in-laws at the moment. Both are in big homes where they raised their families. One set refuses to leave…ever. They will die in that house. The other couple is preparing to downsize dramatically and relocate. Why? It’s become dangerous to do stairs, maintaining the house and landscaping coupled with the ridiculous taxes (they aren’t in the dc metro area) is actually quite costly.

I bet if we had better housing options for retirees then more people would downsize. Nobody wants to leave their nice neighborhood with good neighbors in highly desirable areas (read: safe, near good amenities, etc.) for a cheaper, less desirable area. Not everybody wants to live in Leisure World.

And now that prices spiked in Florida and/or their politics went bananas, plenty of folks in the dc area are no longer interested in relocating down there.

DH and I will think hard before downsizing, but I would be up for it if we could make the numbers work and land in a desirable area.

Agree with this. My parents sold my childhood home a couple years ago in part because of the stairs issue, also upkeep. They were fortunate in that there are a few over-55 type communities in their area with rental options within their price range. My ILs live in an area that does not have great options for retirees- seems like most stay in their homes until it’s time for assisted living- and their current house is huge. They say they want to downsize, and have had young families offer to buy their current house, but they don’t know where to go.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’m dealing with elderly parents and in-laws at the moment. Both are in big homes where they raised their families. One set refuses to leave…ever. They will die in that house. The other couple is preparing to downsize dramatically and relocate. Why? It’s become dangerous to do stairs, maintaining the house and landscaping coupled with the ridiculous taxes (they aren’t in the dc metro area) is actually quite costly.

I bet if we had better housing options for retirees then more people would downsize. Nobody wants to leave their nice neighborhood with good neighbors in highly desirable areas (read: safe, near good amenities, etc.) for a cheaper, less desirable area. Not everybody wants to live in Leisure World.

And now that prices spiked in Florida and/or their politics went bananas, plenty of folks in the dc area are no longer interested in relocating down there.

DH and I will think hard before downsizing, but I would be up for it if we could make the numbers work and land in a desirable area.

Agree with this. My parents sold my childhood home a couple years ago in part because of the stairs issue, also upkeep. They were fortunate in that there are a few over-55 type communities in their area with rental options within their price range. My ILs live in an area that does not have great options for retirees- seems like most stay in their homes until it’s time for assisted living- and their current house is huge. They say they want to downsize, and have had young families offer to buy their current house, but they don’t know where to go.

My parents sold their house and moved into an apartment in DC. It's a nice 2-bedroom in a nice neighborhood, but easily affordable after selling their 4 bedroom house. Elevator, doorman, and they don't have to deal with any maintenance. If the city doesn't feel comfortable to you, there are lots of suburbs around DC with these kind of apartment buildings that are near metro and in safe neighborhoods with good amenities.

Bonus is that living in a place like this ensures you will stay reasonably active -- walk places and be around people. I think often older people get very set in their ways living in residential areas where they drive everywhere and don't really have to make much effort to interact with others. It makes you old faster.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yep we are the older people everyone likes to blame at the moment. 3000 sq ft house in a good school district, almost paid off. more house than we need or want and we would love to downsize, but the way prices are, a smaller house would be more than we paid for our original house and with a mortgage would actually cost more than we are paying at the moment. we don't want to stay put, but it doesn't make any sense to move.

The only thing I can think of, what happens to good school districts with old people not budging to downsize down the road? Not enough kids going to those school districts.

I can answer this. I live on the west coast and we have been thinking about leaving our $1.5M house in the city school district to buy into a very good school district in a self-contained smaller city with its own police/schools/utilities/parks. To afford a house there we’ll need to leave our 3% mortgage and pay at least $2.5M.

While doing research, we found a ton of consulting and demographic reports from school board meetings and realized that the very good school district is rapidly shrinking- graduating HS classes are going from 400 this year to a projected 300 when my DD will be in HS. They plan to close at least one elementary soon but need to update several buildings in the meantime. The problem? When they’ll need to put a levy up for vote the majority of voters will be >55 and in 10 years the majority will be >65. The area has strong zoning and discourages condos, apartments and assisted living, so most residents plan to age in place.

I think the schools will bounce back, but high housing costs in our area and younger families locked out of houses in “good” districts mean it will take the older generation dying for a reset. And then schools will be stretched for a while to accommodate the rush of new families- that’s what happened in my childhood suburb.

You're smart to research this before buying. Is this by any chance CA? CA has different issues with families fleeing due to rising crime and insane progressive politics.

If it is California, it probably has more to do with Prop 13 than families "fleeing" due to rising crime.

DP: I live in CA, of those fleeing I have never heard anyone say "it's because of prop 13" which never comes up in any conversations I've had with those thinking of leaving. It's overwhelmingly because of 1)politics 2)crime 3)cost of living. Obviously I haven't spoken to everyone who is leaving the state, but you saying it's because of Prop 13 is misguided and false.

What do you think drives up the cost of living? Why is housing so expensive? Because of Prop 13. Why don't you know this? It has created the housing shortage, driven up the costs of real estate due to artificially low inventory, and caused schools to become underfunded.