The United States has come a long way since the 2008 Global Financial Crisis. In 2010, the economy started what has now been a strong period of recovery and growth. Real GDP is now the highest on record. A growing economy is great for job seekers, which can be seen with record low unemployment figures. However, the home market is a different story. High costs, a shrinking rate of new construction, and increased costs of lending are causing stagnation. Some key statistics show that 2018 has not been the best year for the real estate industry.
Americans Are Now Less Mobile Than Ever
High mobility has always been a point of pride for the American home market. Sales from relocations and upgrades are important for growth and sustainability.
Worrying new data has now revealed that homeowners are staying in their homes for longer. Attom Data Solutions, a real estate analytics firm, found that homes sold during the previous quarter had been owned for an average of 8.2 years, which is close to double the figure recorded ten years ago.
Attom believes that homeowners are still on the tail end of the financial crisis, with less flexibility to relocate or purchase move-up homes.
Millions of Homeowners Owe More Than Their Home Market Value
One of the reasons that more Americans are staying put could be the fact that 2.2 million homeowners owe more on their mortgages than their homes are worth. A small but concerning group of just over half a million people have less than 5% equity in their homes.
Rates Could be Keeping Americans in Their Homes
Higher interest rates could also be a factor. The cost of borrowing is increasing thanks to federal rate hikes. Monthly averages below 4% have not been unusual throughout the last decade. Now that rates are climbing again, homeowners may be less willing to sign for a new mortgage and lose their current rate. With more federal rate hikes scheduled, mortgages will become costlier in the coming years.
Sellers may have to face the prospect of a shrinking pool of available buyers, whereas anybody currently in the market for a move-up home or first home should consider that rates are likely to go up from this point.
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