Squeezed by high interest rates and record prices, homeowners are frozen in place. They can’t sell. So first-time buyers can’t buy.
If buying a home is an inexorable part of the American dream, so is the next step: eventually selling that home and using the equity to trade up to something bigger.
But over the past two years, this upward mobility has stalled as buyers and sellers have been pummeled by three colliding forces: the highest borrowing rates in nearly two decades, a crippling shortage of inventory, and a surge in home prices to a median of $434,000, the highest on record, according to Redfin.
People who bought their starter home a few years ago are finding themselves frozen in place by what is known as the “rate-lock effect” — they bought when interest rates were historically low, and trading up would mean a doubling or tripling of their monthly interest payments.
They are locked in, and as a result, families hoping to buy their first homes are locked out.
Can you renovate your current home to get another bedroom and maybe some more common space?
You could probably get a 2nd mortgage for a project like that but if you aren’t familiar with them then you should speak to a financial advisor (one that has a fiduciary duty to you). This may allow you to keep your existing mortgage and rate on the first loan and only pay the higher rate on the 2nd.
We unfortunately live in an HOA neighborhood where they don’t allow extensions to be built. There is technically enough space in the backyard to add more, but it would result in us losing half of our backyard which isn’t big to begin with.
Developers in recent years have built houses so crammed together that there isn’t land to add more square footage.