this post was submitted on 03 Jun 2024
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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.

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[–] mipadaitu@lemmy.world 42 points 6 months ago (4 children)

Maybe we shouldn't have kept interest rates at near zero for decades, especially when the economy was doing well. Maybe that would have eased the transition a bit.

[–] Bridger@sh.itjust.works 85 points 6 months ago (2 children)

Maybe we shouldn't give tax Advantages to predatory corporate landlords.

[–] mipadaitu@lemmy.world 22 points 6 months ago (2 children)

There's certainly a lot that can still be done, interest rates are just one lever.

Incentives to buy ONE home, but far less of them to get a second (and none, or start making big penalties for 3+)

[–] themeatbridge@lemmy.world 26 points 6 months ago (1 children)

Or just prohibit corporate ownership of single family homes and townhouses. Let them build condos in walkable cities and leave the farmland alone.

[–] assembly@lemmy.world 8 points 6 months ago (2 children)

This is such an obvious solution that I’m surprised there isn’t wider discussion on laws pushing this.

[–] themeatbridge@lemmy.world 13 points 6 months ago

Corporate real estate investors own a lot of politicians, and there is no organization or superpac that looks out for literally everyone who isn't rich. We don't have a seat at the table.

[–] homesweethomeMrL@lemmy.world 3 points 6 months ago

first_time.jpg

[–] Bridger@sh.itjust.works 5 points 6 months ago

Progressive residential property tax rates. The first home, low tax. Second home, a bit higher. Third home, a bigger bit higher and so on until somewhere around the 8th or 10th one the annual rate hits 100% and keeps going.

[–] JJROKCZ@lemmy.world 9 points 6 months ago (1 children)

Maybe we just shouldn’t let corporations own residential property and limit individuals to say 5-10 homes. That way we don’t have 4 corps owning all the homes and rich people can still have vacation homes in half a dozen states

[–] Ghostalmedia@lemmy.world 3 points 6 months ago

Maybe we should maybe

[–] givesomefucks@lemmy.world 8 points 6 months ago (2 children)

Interest rates aren't causing this problem.

Low interest helps buyers compete against cash offers from investors and corpos.

When rates are high, it incentivizes that type of buyer because it's costing people who would live there more.

Now, traditional wisdom says higher interest encourages lending because banks like money. But times have changed, they get better returns on student loans, credit cards, or rent after they buy up homes.

There's just better investment opportunities for lenders, and instead of cracking down on the other ways they make money to make lending more attractive, were trying to pay them more to want to do mortgages.

Which is not sustainable.

[–] TubularTittyFrog@lemmy.world 7 points 6 months ago

nobody complete against cash investors. cash wins the vast majority of the time, even given a slightly lower offer, because it's a cleaner transaction for the seller.

[–] disguy_ovahea@lemmy.world 3 points 6 months ago* (last edited 6 months ago)

Have you ever looked at an amortized loan with 8% interest? You pay more 3x the value of the house on a 30-year mortgage.

[–] mean_bean279@lemmy.world 3 points 6 months ago (1 children)

But think of the economy. 😡

[–] Zorsith@lemmy.blahaj.zone 2 points 6 months ago

If housing is a single point of failure for the economy, the economy has already failed.

[–] SeaJ@lemm.ee 1 points 6 months ago (1 children)

Inflation was low. Raising interest rates when inflation is low is a recipe for persistent deflation like Japan has.

[–] explodicle@sh.itjust.works 0 points 6 months ago* (last edited 6 months ago) (1 children)

Oh no not the nightmare that is Japan, I want more GDP so the rich get richer.

[–] SeaJ@lemm.ee 0 points 6 months ago (1 children)

Almost all countries with lower levels of inequality and decent income have inflation. Deflation actually works against the poor because they are the ones needing to borrow to make any large purchase and the banks can only set rates so low. The solution to wealth inequality is absolutely NOT deflation.

[–] explodicle@sh.itjust.works 0 points 6 months ago (1 children)

It's not a solution to wealth inequality, but doesn't drastically worsen inequality (Cantillon effect) like the dollar has since the Nixon Shock. We have 100% been played for fools.

Inflation works against the poor because that interest rate is added to the real rates offered to the poor - borrowers, not lenders, pay the price.

[–] SeaJ@lemm.ee 0 points 6 months ago (1 children)

And what do you think happens when there is deflation, especially if it is negative by several percent? The real rate people pay is up significantly even if the nominal rate is 0%.

[–] explodicle@sh.itjust.works 0 points 6 months ago

Nothing happens. We don't take out as many loans we can't afford, we don't make a bunch of subprime loans with other people's savings, and our time preferences aren't shortened.

I agree that real rates are high, so I'm not sure what you're getting at with that.