Mortgage lock-in is an often overlooked area of the U.S. housing market. It hampers the ability of homeowners to sell their properties, adding to the shortage in supply of available homes, pushing house prices ever higher.
Here’s the problem. Most of the 50 million active mortgages in the U.S. have fixed rates. Those taken out prior to 2022 when the Federal Reserve began raising interest rates will have fixed mortgage rates at far below the prevailing market rate, which creates a disincentive to sell.
Families who, for whatever reason, need to upscale, instead of re-mortgaging at current high rates, are staying put and extending or making improvements to their existing homes.
This has helped boost sales at home development retailers such as Home Depot Inc (NYSE:HD) and Lowe’s Companies Inc (NYSE:LOW) — both up around 30% in the past year — but has added to the problem of falling sales of ...