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

[Anonymous]

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.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’ll sit on my 2.75% 30 year for as long as possible. I’ll rent it, leave it vacant, whatever it takes. 5-6 years from now the payment will be a shrinking portion of my take home. I look forward to sticking to the banks. I still have DTI left at my current income to finance another house. I will NEVER sell.

This is such a strange flex. So you'd rather be a landlord rather than sell and invest the proceeds, no matter which scenario makes more financial sense?

Agreed. Also kind of an unnecessarily aggressive and defensive response. Look I get it, I also have a super low rate and have no interest in moving or selling anytime soon but you may benefit from chilling out a tad.

[Anonymous]

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.

That's what we've done and now that we're empty nesters it's a good size again

[Anonymous]

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.

My in-laws couldn’t do it anymore. They sold their large home and bought a small condo. They didn’t want the work. They seem way happier.

[Anonymous]

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.

That’s a dumb comparison.

I thought that too on my initial read. Like yeah, the house you bought in 1992 for 300k? No you’re not going to get a smaller, but equally nice house in an equally nice area for less than that. It’s 30 years later.

[Anonymous]

If you have a rate less than 3% and can swing it…keep it for as long as you can and rent it, you should be net positive, even considering alternative investments.

The one thing most of the comparisons focus on is ‘the now’. Not opportunity cost, retirement plans, etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’ll sit on my 2.75% 30 year for as long as possible. I’ll rent it, leave it vacant, whatever it takes. 5-6 years from now the payment will be a shrinking portion of my take home. I look forward to sticking to the banks. I still have DTI left at my current income to finance another house. I will NEVER sell.

This is such a strange flex. So you'd rather be a landlord rather than sell and invest the proceeds, no matter which scenario makes more financial sense?

No, I agree with the first PP. We're in the same situation. My neighbor upgraded right before Covid, and rents out her first house. My DD's friend moved to a larger house, but they're renting out their old home. We're all in Bethesda. People are trying to hang on to those properties, because the longer you hold on to them, the more valuable the land is. We stayed in our tiny starter home, and now our oldest is in college. If/when we move, one of our kids may use the house.

[Anonymous]

Anonymous wrote:Yes higher mortgage rates hurt, but not as much as some articles (or posts) would have you believe. You have to do the math for your own situation.

Household A: Locked in 2.5% on a $750K mortgage (monthly pmt $2963). That means interest expenses in the first five year of mortgage are roughly $18K / year. Adding the SALT deduction of $10K, they can deduct $28K come tax time (or just take the equivalent $27.7K standard deduction).

Household B: in current market, gets 7% rate on same $750K mortgage (monthly pmt $4989). That mean deducible yearly interest expense of roughly $51.5K. With SALT, that's $61.5K deductible, an increase of $33.5K in deductible expenses for tax savings of $13.4K (assuming 40% combined fed/state marginal tax rate), or $1117 per month. That reduces the effective after tax monthly payment to $3872 when compared to household A's mortgage. That's equivalent to a 4.66% mortgage rate (after tax).

So, relative to the 2.5% mortgage, still a big jump, but not as big as the hype would have you believe.

Per above poster claiming a $50K raise would be required: to handle that difference, you'd need an extra $3872 - $2963 = $909 per month, or $10908 annual after tax increase in income, which means a gross salary increase of roughly $18K before taxes are taken out (again assuming 40% combined marginal rate). Any price increase component should be ignored: it has presumably also increased the equity in your existing home. For someone making $300K, that's a roughly 6% raise, so it shouldn't be that big of a factor (assuming folks won't go through the trouble of a job change for small raises).

TLDR: do the math for your own situation, it may be a lot milder than the Sturm und Drang online would have you believe.

I think you’re oversimplifying. As someone with a 300k HHI I can tell you that just simply getting a raise to make an extra 900/month isn’t that easy without switching jobs, especially if that income is from 2 spouses working so each would need to get an average 6% increase. Further, I’d also need some raises just to afford to move up to another house to begin with.

For instance, my originally 900k house (with originally 650k loan, about 575k left) is now worth about $1.2m. There are home with more space I’d love to move to for about $1.5m. If I sell my home I’d net maybe 550,000 after 4.5% fees + 10k closing costs. So now I have to come up with another 200k downpayment *and* $900/month. That is going to take a lot more raises than 6%. And maybe at a lower interest rate I could have swung a larger mortgage in lieu of coming up with the full 200k extra DP. But added all together with existing inflation on stuff, I just don’t know how we’d ever move up to another house. So it just makes sense to make do with our existing home.

[Anonymous]

Yeah, we're in a house that's less than ideal in so many ways. In DCUM land it probably qualifies as a slum dwelling lol. But we owe less than $200 K on it and it's at under 4%.

It's a 2 unit house and the unit we're in is too small for the family we have. Oh well. Make do.

This is just life for people in the middle class, not the DCUM ($800 K per year and I'm struggling) impression thereof.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’ll sit on my 2.75% 30 year for as long as possible. I’ll rent it, leave it vacant, whatever it takes. 5-6 years from now the payment will be a shrinking portion of my take home. I look forward to sticking to the banks. I still have DTI left at my current income to finance another house. I will NEVER sell.

This is such a strange flex. So you'd rather be a landlord rather than sell and invest the proceeds, no matter which scenario makes more financial sense?

Unless rates go back down to sub 3 or 4, exactly. Being able to access leverage at that rate is basically free. I put 20% liquidity at risk and got 4x that at a killer rate on a virtually risk free asset. Every year my monthly payment is paid with dollars that have less and less buying power.

Inflation has already gone to nearly 3x my rate. With so much cheap money out there from 12+ years of low rates, inflation could stay well above my rate for a long time. My interest rate is 35 bps above the fed’s inflation target. They’re not easing up on the fed fund rate until inflation eases and even when they do, inflation will come back if they move too quickly. So if rates come back down I will sell and re-leverage but until then I’m holding on to essentially free money.

Besides, if the asset goes way up and I really want to take out higher rate debt, I can take out another loan against it and keep the first mortgage at the low rate.

[Anonymous]

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.

This. I’d love to move but we owe less than $300K with a rate of 2 and 3/8%. Moving would be a very unwise financial decision.

[Anonymous]

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.

No hate here. It doesn't make sense for older people to downsize unless they're paying cash for their next home. At least your home is large enough to host your grown kids and grandkids when they visit.

+1. Why would you downsize into any type of mortgage?

[Anonymous]

We can’t sell, we would, but no guarantee of long term remote work means there’s nothing within commuting distance to buy that we could afford (right now we both commute 2x a week which would be doable). If I knew for sure that I could telework a few days a week, we would sell and buy something more affordable further out. We bought in 2013, refinanced during the pandemic.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Gotta be tough for a company to get anyone to move for a job at this point.

I did the math today. To maintain my same quality of home, given price increases and mortgage rates, I'd need about a $50K increase in annual income before taxes.

And yet the Biden RTO thread is full of people insisting there are people lining up to take federal jobs in DC and refilling vacant positions is no problem!

What does RTO mean - asking honestly.

Return to office. A lot of federal agencies are increasing in-person requirements.

For feds RTO not same as RTW - Feds don't work but Biden wants to drag their a$$ in as it is negatively impacting the economy.

[Anonymous]

Apparently Zillow's feeling the stretch - no one can afford to buy or jump at 7% rates...shocker